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PUBLICACCOUNTS

CONSOLIDATED FINANCIAL STATEMENTS OF THE GOUVERNEMENT DU QUÉBEC

Fiscal year endedMarch 31, 2014

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This volume presents the consolidated financial statements of the Gouvernement du Québec, as well as a financial analysis that facilitates understanding of the transactions carried out in fiscal 2013-2014.

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20132014

THE 2013-2014 PUBLIC ACCOUNTS PRESENT THE FINANCIAL POSITION OF THE GOUVERNEMENT DU QUÉBEC AND ITS OPERATIONS.

PUBLIC ACCOUNTS 2013-2014

VOLUME 1


Fiscal year ended March 31, 2014

Published in accordance with section 86

of the Financial Administration Act (CQLR, chapter A-6.001)

Public Accounts 2013-2014 - Volume 1

Legal deposit - Bibliothèque et Archives nationales du Québec

November 2014

ISSN 0706-2850 (Print version)

ISSN 1925-1823 (PDF)

© Gouvernement du Québec, 2014

His Honour the Honourable Pierre Duchesne

Lieutenant-Governor of Québec

Parliament Building

Québec

Your Honour,

I am pleased to present you with the Public Accounts of the Gouvernement du Québec for the fiscal year ended

March 31, 2014.

Carlos Leitão

Minister of Finance

Québec, November 2014

Mr. Carlos Leitão

Minister of Finance

Parliament Building

Québec

Dear Minister,

In accordance with the commission entrusted to me, I have the honour of presenting the Public Accounts of the

Gouvernement du Québec for the fiscal year ended March 31, 2014. These accounts have been prepared under

section 86 of the Financial Administration Act (CQLR, chapter A-6.001), in accordance with the Government's

accounting policies.

Respectfully yours,

Simon-Pierre Falardeau, CPA, CA

Comptroller of Finance

Québec, October 2014

P U B L IC A C C O U N TS 2 0 1 3 - 2 0 14 – V O L U M E 1

7

TABLE OF CONTENTS

PRESENTATION OF THE PUBLIC ACCOUNTS ................................................................................................ 11

ANALYSIS OF THE CONSOLIDATED FINANCIAL STATEMENTS

1. HIGHLIGHTS FOR THE 2013-2014 FISCAL YEAR.................................................................................... 15

2. OVERVIEW OF BUDGET 2013-2014 ...................................................................................................... 17

3. RISKS AND UNCERTAINTIES .................................................................................................................. 19

4. BALANCED BUDGET ACT ..................................................................................................................... 21

5. VARIANCE ANALYSIS ............................................................................................................................ 23

5.1 COMPARISON OF ACTUAL RESULTS WITH THE BUDGET ............................................................... 24

5.2 COMPARISON OF ACTUAL RESULTS WITH THE PREVIOUS FISCAL YEAR ....................................... 27

6. ANALYSIS OF MAIN TRENDS ................................................................................................................. 31

7. RESULTS OF THE INDICATOR ANALYSIS ............................................................................................... 43

APPENDIX 1 - FINANCIAL STATISTICS ...................................................................................................... 55

APPENDIX 2 - INFORMATION BY REPORTING SECTOR .............................................................................. 61

APPENDIX 3 - GLOSSARY ......................................................................................................................... 65

CONSOLIDATED FINANCIAL STATEMENTS

STATEMENT OF RESPONSIBILITY ................................................................................................................. 73

INDEPENDENT AUDITOR’S REPORT ............................................................................................................. 75

CONSOLIDATED STATEMENT OF OPERATIONS ............................................................................................ 81

CONSOLIDATED STATEMENT OF ACCUMULATED DEFICIT .......................................................................... 82

CONSOLIDATED STATEMENT OF FINANCIAL POSITION................................................................................ 83

CONSOLIDATED STATEMENT OF CHANGE IN NET DEBT .............................................................................. 84

CONSOLIDATED STATEMENT OF CASH FLOW .............................................................................................. 85


8

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1. SIGNIFICANT ACCOUNTING POLICIES .................................................................................................... 87

2. MEASUREMENT UNCERTAINTY ............................................................................................................ 99

3. ACCOUNTING CHANGES ...................................................................................................................... 100

4. TAX-FUNDED TRANSFERS ................................................................................................................... 101

5. DUTIES AND PERMITS ......................................................................................................................... 102

6. CASH ................................................................................................................................................... 103

7. SHORT-TERM INVESTMENTS ............................................................................................................... 104

8. ACCOUNTS RECEIVABLE ..................................................................................................................... 105

9. LOANS AND PORTFOLIO INVESTMENTS .............................................................................................. 106

10. GENERATIONS FUND .......................................................................................................................... 109

11. ACCOUNTS PAYABLE AND ACCRUED EXPENSES ................................................................................. 111

12. DEFERRED REVENUE........................................................................................................................... 112

13. OTHER LIABILITIES ............................................................................................................................. 114

14. FEDERAL GOVERNMENT TRANSFERS TO BE REPAID ........................................................................... 115

15. PENSION PLANS AND OTHER EMPLOYEE FUTURE BENEFITS ............................................................... 116

16. RISK MANAGEMENT AND DERIVATIVE INSTRUMENTS........................................................................ 130

17. DEBTS ................................................................................................................................................. 132

18. FIXED ASSETS ..................................................................................................................................... 138

19. CONTRACTUAL OBLIGATIONS ............................................................................................................ 141

20. LOAN GUARANTEES ............................................................................................................................ 146

21. CONTINGENCIES ................................................................................................................................. 149

22. CASH FLOW INFORMATION ................................................................................................................. 150

23. ASSET-BACKED TERM NOTES (ABTNS) ............................................................................................. 152

24. COMPARATIVE FIGURES ..................................................................................................................... 155


9

APPENDICES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1. NATIONAL ASSEMBLY, APPOINTED PERSONS, GOVERNMENT DEPARTMENTS

AND BODIES WHOSE FINANCIAL TRANSACTIONS WERE CONDUCTED FROM

THE GENERAL FUND OF THE CONSOLIDATED REVENUE FUND ......................................................... 157

2. GOVERNMENT BODIES, SPECIAL FUNDS AND SINKING FUNDS ........................................................... 159

3. ORGANIZATIONS IN THE GOVERNMENT’S HEALTH AND SOCIAL SERVICES

AND EDUCATION NETWORKS ............................................................................................................. 162

4. GOVERNMENT ENTERPRISES ............................................................................................................. 172

5. GOVERNMENT DEPARTMENTS AND BODIES THAT CONDUCT FIDUCIARY TRANSACTIONS

NOT INCLUDED IN THE GOVERNMENT'S REPORTING ENTITY ............................................................. 173

6. REVENUE ........................................................................................................................................... 174

7. EXPENDITURE .................................................................................................................................... 175

8. INVESTMENT IN GOVERNMENT ENTERPRISES .................................................................................... 176

9. SEGMENT DISCLOSURES .................................................................................................................... 185

10. FIDUCIARY TRANSACTIONS CONDUCTED BY THE GOVERNMENT ..................................................... 189


11

Presentation of the Public Accounts

The 2013-2014 Public Accounts present the financial position of the Gouvernement du Québec and its

operations. They include a financial analysis to increase their usefulness and transparency. The analysis

presents the changes in the main trends for the major consolidated financial statement items.

The Ministère des Finances considers that the use of indicators is efficient for studying changes in the

state of the Government’s finances. Therefore, eleven indicators are presented in the section “Analysis of

the consolidated financial statements”.

The 2013-2014 Public Accounts present information on the actual results for the fiscal year ended

March 31, 2014. The initial forecasts of the results for this fiscal year were presented in

Budget 2013-2014 on November 20, 2012 and revised in the March 28, 2013 Update on Québec’s

Economic and Financial Situation and in the November 28, 2013 Update on Québec’s Economic and

Financial Situation. The preliminary results were presented in Budget 2014-2015 on June 4, 2014. The

comparative analysis with the Budget that appears in the present publication was made using the initial

forecasts in Budget 2013-2014 according to the standards adopted by the Public Sector Accounting Board

(PSAB).

The Public Accounts for the fiscal year ended March 31, 2014 have been prepared by the Comptroller of

Finance for the Minister of Finance in accordance with the accounting policies established by the Conseil

du trésor and pursuant to the provisions of section 86 of the Financial Administration Act

(CQLR, chapter A-6.001). They are published in two volumes.

Preparing the Public Accounts requires the participation and collaboration of many employees from

different government departments, funds, bodies, and organizations in the health and social services and

education networks as well as employees from government enterprises. We would like to thank all of

them for their help in publishing these documents.

Volume 1 – Consolidated financial statements of the Gouvernement du Québec

Volume 1 presents the consolidated financial statements of the Gouvernement du Québec, as well as a

financial analysis that facilitates understanding of the transactions carried out in fiscal 2013-2014.


12

Presentation of the Public Accounts (cont’d)

The consolidated financial statements consist of many items:

A consolidated statement of operations, which accounts for the annual surplus or deficit arising from

operations during the fiscal year. It presents the Government’s revenue, the cost of services and other

expenses for the year.

A consolidated statement of accumulated deficit, which shows the change in the accumulated deficit

taking into consideration the results for the fiscal year, items charged directly to it and various

restatements stemming from accounting changes.

A consolidated statement of financial position, which presents the financial resources of the

Gouvernement du Québec as well as its obligations. It establishes the net debt, which consists of the

accumulated deficit and non-financial assets.

A consolidated statement of change in net debt, which accounts for the combined effect on the net

debt of the results for the fiscal year, the change in non-financial assets, items charged directly to the

accumulated deficit and restatements stemming from accounting changes.

A consolidated statement of cash flow, which provides information on the Government’s liquid

assets generated by or used during the fiscal year within the context of operating, equity investment,

fixed asset investment and financing activities.

Notes and appendices, which provide additional information on the items of the consolidated

financial statements and which are an integral part of the consolidated financial statements. They

also include a summary of the main accounting policies used to prepare the consolidated financial

statements, as well as consolidated information by government mission on operations.

In accordance with the Auditor General Act (CQLR, chapter V-5.01), the Auditor General of Québec

prepares, as an independent auditor, a report included with the Government’s consolidated financial

statements in which he expresses his opinion on the financial statements.

Volume 2 – Financial information on the Consolidated Revenue Fund: general fund and

special funds

Volume 2 présents the financial information on the Consolidated Revenue Fund, which is made up of the

general fund and the special funds. This volume is divided into two parts. The first part reports on the

revenue of government departments and budget-funded bodies, their authorized appropriations, the

expenses and other costs charged to each of these appropriations and, lastly, the financial operations of

the specified purpose accounts they administer. The second part presents the revenue of the special funds

as well as their approved and realized expenses and investments.

AnAlysisof consolidAtedfinAnciAl stAtements

Se

ct

ion

1

A N A L Y S IS O F T H E C O N S OL ID A T E D F IN A N C IA L

S T A T E M EN T S 2 0 13 - 2 0 1 4

15

1. Highlights for the 2013-2014 fiscal year

Consolidated operations FISCAL YEAR ENDED MARCH 31, 2014 (in millions of dollars)

Budget 2013-2014 2013-2014 actual results

Total

revenue

95 192

100.0%

Own-source

revenue(1)

77 031

80.9%

Federal

government

transfers

18 161

19.1%

Annual surplus(2)

1 039

1.1%

Expenditure

(excluding debt

service)

82 884

87.1%

Debt service

10 869

11.4%

Total

expenditure

93 753

98.5%

Total

revenue

93 231

100.0%

Own-source

revenue(1)

74 681

80.1%

Federal

government

transfers

18 550

19.9%

Annual deficit

(1 703)

(1.8%)

Expenditure

(excluding debt

service)

84 336

90.4%

Debt service

10 598

11.4%

Total

expenditure

94 934

101.8%

2012-2013 actual results

Total

revenue(3)

87 839

100.0%

Own-source

revenue(1)

70 322

80.1%

Federal

government

transfers

17 517

19.9%

Annual deficit(3)

(2 515)

(2.9%)

Expenditure

(excluding debt

service)

80 515

91.7%

Debt service

9 839

11.2%

Total

expenditure

90 354

102.9%

Note: Based on the data presented in the summary of consolidated operations on page 23.

(1) Own-source revenue includes Generations Fund revenue of $1 039 M, $1 121 M and $961 M for Budget 2013-2014 of November 20, 2012, for actual 2013-2014 results and for actual 2012-2013 results, respectively.

(2) The anticipated annual surplus includes a $400 M contingency reserve.

(3) Total revenue and the annual deficit for 2012-2013 include the loss of $1 876 M arising from discontinued operations following the closure of the Gentilly-2 nuclear generating station.

Budget balance

In Budget 2013-2014 of November 20, 2012, the Government forecast an annual surplus

of $1 039 million. Taking into account the allocation of $1 039 million in revenue to the Generations

Fund, the anticipated budget balance within the meaning of the Balanced Budget Act1 was zero.

The results for fiscal 2013-2014 show an annual deficit of $1 703 million. Taking into account the deposit

of $1 121 million in dedicated revenues in the Generations Fund, the budget balance within the meaning

of the Balanced Budget Act was in deficit by $2 824 million, which represents an upward adjustment of

the deficit by $2 824 million compared with the Budget forecast.

1 CQLR, chapter E-12.00001


16

1. Highlights for the 2013-2014 fiscal year (cont’d)

Consolidated revenue

Total consolidated revenue stood at $93 231 million, which represents a downward revision

of $1 961 million, or -2.1%, compared with the Budget. It was up $5 392 million, or 6.1%, relative to

fiscal 2012-2013.

The difference between revenue for the current fiscal year and the figure announced in the initial

Budget can be explained by the fact that revenue from income and property taxes, from consumption

taxes and from duties and permits was, respectively, $1 846 million, $988 million and $17 million

lower than expected. This was offset in part by increases of $97 million in miscellaneous revenue,

$322 million in revenue from government enterprises, $82 million in Generations Fund revenue

and $389 million in federal government transfers.

The increase of $5 392 million in revenue for the current fiscal year relative to the previous fiscal

year can be attributed primarily to increases of $793 million in revenue from income and property

taxes, $1 056 million in consumption taxes, $114 million in duties and permits, $2 198 million in

revenue from government enterprises, mainly due to the recording of the loss of $1 876 million

in 2012-2013 arising from the closure of Hydro-Québec’s Gentilly-2 nuclear generating station,

$160 million in Generations Fund revenue and $1 033 million in federal government transfers due, in

particular, to the federal compensation for harmonization of the QST with the GST.

Consolidated expenditure

Consolidated expenditure stood at $94 934 million, which represents an upward adjustment

of $1 181 million, or 1.3%, compared with the Budget forecast. Relative to the previous fiscal year,

consolidated expenditure rose by $4 580 million.

Budget 2013-2014 forecast a growth rate of 3.0% for consolidated expenditure, whereas the actual

rate was 5.1%. This higher-than-anticipated growth can be attributed mainly to an upward

adjustment of $1 013 million in 2013-2014 for the “Education and Culture” mission compared with

the forecast.

The increase of $4 580 million in expenditure for fiscal 2013-2014 relative to the previous fiscal year

is due to spending increases of $1 585 million for the “Health and Social Services” mission,

$1 080 million for the “Education and Culture” mission, $570 million for the “Economy and

Environment” mission, $210 million for the “Support for Individuals and Families” mission,

$376 million for the “Administration and Justice” mission and $759 million for debt service.


S T A T E M EN T S 2 0 13 - 2 0 1 4

17

2. Overview of Budget 2013-2014

The annual surplus forecast in Budget 2013-2014 was $1 039 million. After the allocation

of $1 039 million in revenue to the Generations Fund, the anticipated budget balance was zero.

Own-source revenue – General fund

The own-source revenue of the general fund, excluding that from government enterprises and that of the

Generations Fund, was expected to increase by 5.9%. This anticipated increase, which surpassed

economic growth, was due in particular to efforts to fight tax evasion, and to increases in the

compensation tax on financial institutions and in the specific taxes on tobacco products and alcoholic

beverages.

Consolidated own-source revenue

Budget 2013-2014 forecast that consolidated own-source revenue would grow by 5.6%. This rate

excludes revenue dedicated to the Generations Fund and from government enterprises.

Revenue from government enterprises

Excluding the impact of the loss arising from discontinued operations following the closure of

Hydro-Québec’s Gentilly-2 nuclear generating station, revenue from government enterprises was

supposed to rise by 3.8% mainly because of an increase in the net earnings of Hydro-Québec,

Loto-Québec and the Société des alcools du Québec.

Revenue dedicated to the Generations Fund

Budget 2013-2014 forecast that the revenue of the Generations Fund would reach $1 039 million. This

revenue, which is recorded in the Government's consolidated financial statements, was applied against the

budget balance within the meaning of the Balanced Budget Act.

Consolidated federal government transfers

Consolidated federal government transfer revenue was expected to rise by 2.6% in 2013-2014. This

change can be explained mainly by the payment of the second instalment of federal compensation for

harmonization of the sales taxes and by the decline in specified purpose account revenue due to the end of

federal infrastructure stimulus programs.


18

2. Overview of Budget 2013-2014 (cont’d)

Program spending – General fund

Budget 2013-2014 anticipated that general fund program spending would rise by 1.8%. It forecast an

increase of $1.0 billion in the budget of the Ministère de la Santé et des Services sociaux, $183 million in

the budget of the Ministère de l’Éducation, du Loisir et du Sport, $122 million in the budget of the

Ministère de l’Enseignement supérieur, de la Recherche, de la Science et de la Technologie

and $77 million in the budget of the Ministère de la Famille. The global budget of the other departments

was expected to decrease by $272 million. For fiscal 2013-2014, the spending forecasts for the Ministère

de la Santé et des Services sociaux, the Ministère de l’Éducation, du Loisir et du Sport and the Ministère

de l’Enseignement supérieur, de la Recherche, de la Science et de la Technologie were $31.3 billion,

$10.2 billion and $6.3 billion respectively.

Consolidated spending (excluding debt service)

Budget 2013-2014 forecast growth of 2.3% in consolidated spending, excluding debt service. Apart from

the explanations for the general fund presented earlier, this growth was due in part to the anticipated

growth in spending by the special funds, particularly the Fund to Finance Health and Social Services

Institutions and the Land Transportation Network Fund, offset by a reduction in specified purpose

account spending due to the end of federal infrastructure stimulus programs.

Consolidated debt service

Debt service was expected to climb by 8.0%. This change was attributed to the anticipated increase in

interest rates, growth in the debt and the impact of past returns of the Caisse de dépôt et placement du

Québec on the income of the Retirement Plans Sinking Fund (this income is applied against the interest

on the pension plan obligations).


S T A T E M EN T S 2 0 13 - 2 0 1 4

19

3. Risks and uncertainties

The following factors are elements of risk and uncertainty that are not directly dependent on the

Government but that can cause actual results to differ from forecast results, particularly:

the economic forecasts the Government uses to determine its annual budgetary revenue, particularly

those concerning changes in economic growth, employment and the Consumer Price Index. For

example, a 1.0% difference in nominal GDP has an impact of about $500 million on the

Government’s own-source revenue;

the level of program spending, whose cost is related to the economic situation. For example, changes

in the labour market affect the cost of employment assistance and income security programs.

Similarly, in the health sector, the aging of the population raises the risk of cost overruns for

medication and public services;

the economic, taxation and population data the Government uses to determine revenue from federal

government transfers, as well as the negotiations carried out regularly with the federal government.

These data and negotiations can both affect federal government transfer revenue;

unforeseen situations such as natural catastrophes, work stoppages, etc.;

the change in interest rates, which has an impact on debt service, is presented in Note 16

(p. 130, 131) of the consolidated financial statements;

the risk that a financial intermediary will default on its contractual obligations (credit risk) is

presented in Note 16 (p. 130, 131) of the consolidated financial statements;

the settlement of certain claims and lawsuits pending against the Government before the courts,

which are presented in Note 21 (p. 149) of the consolidated financial statements.

The consolidated financial statements also set forth in Note 2 (p. 99) the uncertainties to which the

estimates needed to prepare these statements are subject.

To reduce its exposure to risk, the Government develops management strategies for some of these

variables. With the help of economic, fiscal and budgetary policies, the Government can influence its

revenue and expenditure (other than debt service) by:

using forecasts that reflect the consensus of forecasters;

monitoring economic, budgetary and financial indicators, including the monthly reports on its

budgetary revenue and expenditure, and monitoring the results of the consolidated entities;

implementing economic support measures;

using the contingency reserve. Budget 2013-2014 included a contingency reserve of $400 million

for 2013-2014.


20

3. Risks and uncertainties (cont’d)

A government cannot prevent a recession or the impact of an economic slowdown single-handedly.

However, it has the necessary means to play a stabilizing role in order to offset the effects of an economic

slowdown and speed up the recovery.

In addition, financing policies also lead the Government to have an impact on its debt service through

various strategies, as described in detail in Note 16 (p. 130, 131) of the consolidated financial statements.


S T A T E M EN T S 2 0 13 - 2 0 1 4

21

4. Balanced Budget Act

Budget balance

The Balanced Budget Act stipulates that the Québec government may not incur a budgetary deficit.

However, the sections of the Act prohibiting such a deficit were not applicable to fiscal 2009-2010

to 2012-2013.

Fiscal 2013-2014 ended with a budget balance in deficit by $2 824 million, taking into account, in

accordance with the Act, the allocation of $1 121 million to the Generations Fund.

Given the current budgetary situation, the achievement of a balanced budget, which was forecast

for 2013-2014, has been postponed for two years. In this context, the Government will propose

amendments to the Act in order to establish that the return to a balanced budget will be achieved in

fiscal 2015-2016, set the budgetary objective to be reached for fiscal 2014-2015 and allow the budgetary

deficits recognized for fiscal 2013-2014 and 2012-2013.

Budget balance within the meaning of the Balanced Budget Act FISCAL YEAR ENDED MARCH 31, 2014 (in millions of dollars)

Budget

2013-2014

Actual results as at

March 31, 2014

Annual surplus (deficit) 1 039 (1 703)

Revenue of the Generations Fund

Revenue (1 039) (1 121)

Budget balance ─ (2 824)


22

4. Balanced Budget Act (cont’d)

Generations Fund

Budget 2013-2014 forecast that the revenue of the Generations Fund would amount to $1 039 million.

Ultimately, the fund's revenue stood at $1 121 million, or $82 million more than forecast. This change can

be attributed primarily to the fact that realized investment income and water-power royalties were higher

than expected. The fund’s balance was $5 659 million as at March 31, 2014 taking into account the

revenue for the year as well as the deposit from the Territorial Information Fund and the sums used to

repay debts.

Revenue FISCAL YEAR ENDED MARCH 31, 2014 (in millions of dollars)

2013

Budget

2013-2014

Actual results as

at March 31

Actual results as

at March 31

Revenue

Water-power royalties 746 763 717

Unclaimed property 12 19 12

Investment income 281 339 232

Total revenue 1 039 1 121 961

2014

Change in Generations Fund balance FISCAL YEAR ENDED MARCH 31, 2014 (in millions of dollars)

2014 2013

Opening balance 5 238 4 277

300 ―

Revenue 1 121 961

6 659 5 238

Sums used to repay debts 1 000 ―

Closing balance 5 659 5 238

Deposit from the Territorial Information Fund

Note: Based on the data presented on pages 109 and 110 of the consolidated financial statements.


S T A T E M EN T S 2 0 13 - 2 0 1 4

23

5. Variance analysis

Summary of consolidated operations FISCAL YEAR ENDED MARCH 31, 2014 (in millions of dollars)

(1)

$ % $ %

REVENUE

Income and property taxes 41 711 39 865 (1 846) (4.4) 39 072 793 2.0

Consumption taxes 18 123 17 135 (988) (5.5) 16 079 1 056 6.6

Duties and permits 2 215 2 198 (17) (0.8) 2 084 114 5.5

Miscellaneous revenue 8 835 8 932 97 1.1 8 894 38 0.4

Revenue from government

enterprises 5 108 5 430 322 6.3 3 232(2)

2 198 68.0

Revenue of the Generations Fund 1 039 1 121 82 7.9 961 160 16.6

Own-source revenue 77 031 74 681 (2 350) (3.1) 70 322 4 359 6.2

Federal government transfers 18 161 18 550 389 2.1 17 517 1 033 5.9

Total revenue 95 192 93 231 (1 961) (2.1) 87 839 5 392 6.1

EXPENDITURE

Health and Social Services 35 604 35 602 (2) ― 34 017 1 585 4.7

Education and Culture 19 607 20 620 1 013 5.2 19 540 1 080 5.5

Economy and Environment 11 778 11 859 81 0.7 11 289 570 5.0

Support for Individuals

and Families 9 188 9 543 355 3.9 9 333 210 2.3

Administration and Justice 6 707 6 712 5 0.1 6 336 376 5.9

Sub-total 82 884 84 336 1 452 1.8 80 515 3 821 4.7

Debt service 10 869 10 598 (271) (2.5) 9 839 759 7.7

Total expenditure 93 753 94 934 1 181 1.3 90 354 4 580 5.1

Contingency reserve (400) 400 (100.0)

ANNUAL SURPLUS (DEFICIT) 1 039 (1 703) (2 742) n/a (2 515) 812 n/a

Actual results

as at

March 31, 2013

Change

compared with

actual results for

the previous

fiscal year

Budget

2013-2014

Actual results

as at

March 31, 2014

Change

compared with

Budget

(1) Certain figures for 2012-2013 have been reclassified for consistency with the presentation adopted as at March 31, 2014.

(2) In fall 2012, the decision was made to abandon the project to refurbish the Gentilly-2 nuclear generating station and to terminate Hydro-Québec’s nuclear power operations. The abandonment of the project led to a loss of $1 876 M in fiscal 2012-2013.


24

5. Variance analysis (cont’d)

5.1 Comparison of actual results with the Budget


Consolidated revenue for fiscal 2013-2014 was $1 961 million less than forecast in the Budget, owing to

a downward revision of $2 350 million in own-source revenue that was offset in part by an upward

revision of $389 million in federal government transfers.

Own-source revenue

The downward revision of $2 350 million in own-source revenue compared with the Budget results

mainly from the combination of the following changes:

revenue from income and property taxes that was $1 846 million lower than expected, due in

particular to:

— lower-than-anticipated personal income tax revenue, reflected, in particular, by

weaker-than-expected salaries and wages;

— weaker-than-anticipated growth in corporate tax revenue, which can be explained primarily by

the lower-than-anticipated net operating surplus of corporations.

a $988-million downward revision in consumption tax revenue, stemming notably from lower-than-

anticipated Québec sales tax (QST) revenue due to lower-than-forecast growth in household

consumption and residential construction;

a $97-million upward revision in miscellaneous revenue, which can be attributed largely to growth in

the miscellaneous revenue of organizations in the education network;

a $322-million upward adjustment in revenue from government enterprises, owing to the fact that

Hydro-Québec’s results were better than expected because of the cold weather in winter 2014 and

higher export revenue;

an $82-million upward adjustment in Generations Fund revenue, due primarily to the fact that

realized investment income and water-power royalties were higher than anticipated.


S T A T E M EN T S 2 0 13 - 2 0 1 4

25


5.1 Comparison of actual results with the Budget (cont’d)

Consolidated revenue (cont’d)

Consolidated federal government transfers

Federal government transfers were $389 million higher than forecast in Budget 2013-2014. This

difference can be explained in particular by a $255-million upward adjustment in equalization payments,

resulting from, among other things, an improvement in Ontario’s economic situation, which increased its

relative fiscal capacity and thereby led to equalization gains for the other recipient provinces, including

Québec.


26


5.1 Comparison of actual results with the Budget (cont’d)


Total consolidated expenditure for fiscal 2013-2014, excluding debt service, stood at $84 336 million,

which represents an upward adjustment of $1 452 million compared with the Budget. The main

differences in the consolidated expenditure for each mission can be attributed to:

a $1 013-million increase in spending for the “Education and Culture” mission, resulting mainly

from:

— a $197-million rise in spending by the Ministère de l’Éducation, du Loisir et du Sport, due

primarily to the impact of the new actuarial valuations of the pension plans determined after the

November 20, 2012 Budget was tabled;

— growth of $150 million in spending by school boards, owing to lower-than-anticipated

expenditure savings as forecast in the Budget;

— an increase of $295 million in subsidies paid to private universities by the Ministère de

l’Enseignement supérieur, de la Recherche, de la Science et de la Technologie, arising mainly

from an increase in university clientele;

— a $66-million climb in spending related to the tax credit for film production compared with the

figure forecast;

an $81-million increase in spending for the “Economy and Environment” mission, stemming notably

from growth of $79 million in spending related to the tax credit for the construction of public access

roads and bridges in forest areas compared with the figure forecast;

a $355-million increase in spending for the “Support for Individuals and Families” mission, which

can be explained in particular by:

— growth of $172 million in spending related to the tax credit for childcare expenses;

— a rise of $85 million in spending by the Ministère de l’Emploi et de la Solidarité sociale, owing

mainly to an increase in last resort financial assistance.

The actual and forecast consolidated expenditure of both the “Health and Social Services” mission and

the “Administration and Justice” mission were comparable. The increase in spending due to the impact of

the new actuarial valuations of the pension plans for employees in the health network and the civil

service, the unanticipated expenditures of $263 million related to the July 6, 2013 railway accident in

Lac-Mégantic and the $50 million in spending to prepare for the April 2014 general election were offset

by lower program spending for these missions.

Consolidated debt service was $271 million less than forecast in Budget 2013-2014, mainly because of

weaker-than-expected interest rates.


S T A T E M EN T S 2 0 13 - 2 0 1 4

27


5.2 Comparison of actual results with the previous fiscal year


The Government's total revenue for fiscal 2013-2014 was up $5 392 million from the previous fiscal year,

as a result of an increase of $4 359 million in own-source revenue and $1 033 million in federal

government transfers.

Own-source revenue

The increase of $4 359 million, or 6.2%, in own-source revenue is due to:

a $793-million climb in revenue from income and property taxes, caused primarily by:

— an increase of $1 133 million in personal income tax revenue particularly because of growth in

the average weekly remuneration and number of jobs compared with the previous fiscal year, an

increase of 1.75 percentage points in the tax rate for individuals earning over $100 000 and a

rise in retirement income;

— a decline of $409 million in corporate tax revenue, due primarily to a decrease in the net

operating surplus of corporations, which reduced their tax instalments;

a $1 056-million rise in revenue from consumption taxes, resulting mainly from:

— growth of $720 million in sales tax revenue, attributable particularly to the harmonization of the

QST with the GST as of January 1, 2013 for financial institutions, an increase in retail sales and

the results of tax recovery activities;

— growth of $160 million in fuel tax revenue, stemming mainly from the increase of 1 cent per

litre in the specific taxes on gasoline and diesel fuel as of April 1, 2013;

— a $103-million rise in revenue from the tobacco tax, due in particular to the increase in the

specific tax on tobacco as of November 21, 2012;

— a $71-million climb in revenue from the tax on alcoholic beverages, stemming in particular

from the increase in the specific tax on such beverages as of November 21, 2012;

growth of $114 million in revenue from duties and permits, which is explained mainly by:

— an increase of $179 million in forestry rights, attributable mainly to the new forest regime

established under the Sustainable Forest Development Act;

— a $21-million rise in registration fees;

— a $147-million decrease in mining duties due to a decline in mining profits, caused in particular

by the drop in the price of certain mineral substances, and to an increase in mining

companies’ production costs;

— a $24-million climb in revenue from other duties and permits;


28


5.2 Comparison of actual results with the previous fiscal year (cont’d)

Consolidated revenue (cont’d)

growth of $38 million in miscellaneous revenue, stemming notably from:

— a $30-million increase in toll revenue from Autoroute 25 and Autoroute 30;

a $2 198-million increase in revenue from government enterprises, due primarily to the loss, in

2012-2013, of $1 876 million arising from the closure of Hydro-Québec’s Gentilly-2 nuclear

generating station;

a $160-million climb in Generations Fund revenue, resulting mainly from an increase in investment

income and water-power royalties.

Federal government transfers

The increase of $1 033 million, or 5.9%, in federal government transfers, can be explained in particular

by:

growth of $734 million in revenue from federal compensation related to the harmonization of the

sales taxes. Federal compensation for harmonization of the QST with the GST amounted

to $2 200 million and was paid in two instalments, one of $1 467 million in 2013-2014 and another

of $733 million in 2012-2013. This revenue, forecast in the 2013-2014 Budget Plan of

November 20, 2012, was accounted for in conformity with Canadian public sector accounting

standards and in accordance with the conditions provided for in the agreement;

a $498-million rise in health transfer revenue;

an increase of $442 million in equalization revenue, resulting from, among other things, an

improvement in Ontario’s economic situation, which increased its relative fiscal capacity, thereby

leading to equalization gains for the other recipient provinces, including Québec;

a decrease of $362 million in protection payments, given that Québec was not eligible for such

payments in 2013-2014;

a decline of $327 million in revenue from other programs, resulting in particular from:

— a $93-million decrease in revenue related to the agreement on the transfer of a portion of the

federal excise tax on gasoline, which ended on March 31, 2014. This agreement contributed to

funding for local and municipal infrastructures;

— a drop of $39 million in the amount to be repaid to the federal government in respect of the

former youth allowance program;

— a $20-million decline in revenue following the end of the Police Officers Recruitment Fund

(a trust fund) in 2012-2013.


S T A T E M EN T S 2 0 13 - 2 0 1 4

29




The increase of $3 821 million, or 4.7%, in expenditure excluding debt service can be attributed to the

following changes:

an increase of $1 585 million, or 4.7%, in spending for the “Health and Social Services” mission,

resulting notably from:

— growth of $1 365 million in labour costs resulting in particular from:

– a $725-million increase in the remuneration paid to general practitioners and specialists;

– growth of $489 million in the remuneration expenses of institutions in the health and social

services network, attributable mainly to the salary indexation of 1.75% provided for in the

collective agreements as of April 1, 2013;

– a $120-million increase in the pension expense, attributable primarily to the new actuarial

valuations for public and parapublic sector employees;

— a $220-million climb in transfer and operating expenditures, owing in particular to:

– subsidies paid by the Ministère de la Santé et des Services sociaux to community

organizations and private institutions;

– the cost of medical and surgical supplies;

– the depreciation expense for the fixed assets of institutions in the health and social services

network;

– the tax credit for home-support services for seniors;

an increase of $1 080 million, or 5.5%, in spending for the “Education and Culture” mission,

resulting in particular from:

— the $375-million climb in the remuneration expenses of school boards, stemming from salary

indexation, salary scale progression, an increase in student clientele and a decline in the

teacher-student ratio, leading to the hiring of additional staff;

— a $255-million increase in subsidies paid by the Ministère de l’Enseignement supérieur, de la

Recherche, de la Science et de la Technologie, arising mainly from an increase in CEGEP and

university clientele;

— a $215-million increase in the pension expense, attributable primarily to the new actuarial

valuations for public and parapublic sector employees;

— a rise of $77 million in the amount related to the refundable tax credit for film production;


30



Consolidated expenditure (cont’d)

an increase of $570 million, or 5.0%, in spending for the “Economy and Environment” mission due

notably to:

— a $310-million rise in the expenditures of the Land Transportation Network Fund, resulting

mainly from an increase in the depreciation expense for fixed assets, arising from transportation

infrastructure investments and growth in the cost of maintaining the road network;

— a $200-million increase in the amounts relating to the refundable tax credits for resources,

multimedia titles and research and development activities;

— growth of $96 million in the expense related to the allowance for losses on guaranteed financial

initiatives;

an increase of $210 million, or 2.3%, in spending for the “Support for Individuals and Families”

mission, stemming in particular from:

— a $98-million climb in the amount related to the tax credits claimed for childcare expenses and

child assistance;

— a rise of $86 million in subsidies granted by the Ministère de la Famille, stemming mainly from

the increase in costs attributable to spaces in existing childcare services and the increase in the

number of spaces;

an increase of $376 million, or 5.9%, in spending for the “Administration and Justice” mission,

resulting notably from:

— expenditures of $263 million related to the railway accident in Lac-Mégantic on July 6, 2013;

— a $79-million increase in the pension expense, attributable primarily to the receipt of new

actuarial valuations for public and parapublic sector employees;

— a $66-million climb in the expenditures of the Agence du revenu du Québec, due mainly to an

increase in staff on account of efforts to step up tax recovery activities.

Lastly, debt service was up $759 million from 2012-2013. This increase is due mainly to the growth of

the debt, an increase in the Government’s obligations following the receipt of new actuarial valuations for

the pension plans of public and parapublic sector employees and the impact of the returns of the Caisse de

dépôt et placement du Québec on the income of the Retirement Plans Sinking Fund (RPSF). The income

of the RPSF is applied against debt service.


S T A T E M EN T S 2 0 13 - 2 0 1 4

31

6. Analysis of main trends

The main trends analysis presented in this section uses data from the consolidated financial statements of

the Gouvernement du Québec.

The data used to determine the trends presented in this section must be analyzed taking into account the

following items:

the impact of the 2006-2007 accounting reform, which incorporated the organizations in the health

and social services and education networks into the Government's reporting entity and revised the

Government's accounting policies to bring them into complete conformity with Canadian public

sector accounting standards;

the impact of the line-by-line consolidation of organizations in the health and social services and

education networks in 2009-2010. Previously, such organizations were accounted for using the

modified equity method.

For the purpose of calculating the annualized growth of revenue and expenditure, the data for 2009-2010

and subsequent years were brought in on a comparable basis, by taking into account the organizations in

the health and social services and education networks using the modified equity method.


32

6. Analysis of main trends (cont’d)

Budget balance within the meaning of the Balanced Budget Act

Change in revenue and expenditure Change in budget balance(1) (in millions of dollars) (in millions of dollars)

55 000

60 000

65 000

70 000

75 000

80 000

85 000

90 000

95 000

2004

-200

5

2005

-200

6

2006

-200

7

2007

-200

8

2008

-200

9

2009

-201

0

2010

-201

1

2011

-201

2

2012

-201

3

2013

-201

4



-4 000

-3 000

-2 000

-1 000

0

1 000

2 000

3 000

4 000

2004

-200

5

2005

-200

6

2006

-200

7

2007

-200

8

2008

-200

9

2009

-201

0

2010

-201

1

2011

-201

2

2012

-201

3

2013

-201

4

Consolidated surp lus (de ficit)

Budget balance

Allocation to the reserve

Use of the reserve

Note: The difference between the consolidated surplus (deficit) in the financial statements and the budget balance within the meaning of the Balanced Budget Act, stems mainly from the revenue allocated to the Generations Fund, the use of the stabilization reserve to maintain a balanced budget in a budgetary deficit situation and the exclusion, in 2012-2013, of the loss arising from discontinued operations following the closure of Hydro-Québec’s Gentilly-2 nuclear generating station.

(1) The sections of the Balanced Budget Act that prohibit a budgetary deficit do not apply to fiscal 2009-2010 to 2012-2013.

In fiscal 2006-2007 and 2007-2008, surpluses were posted to the stabilization reserve. In 2008-2009

and 2009-2010, the financial crisis and the global recession led to a substantial deterioration in the

Government’s financial balances. The use of the stabilization reserve reduced the budget balance within

the meaning of the Balanced Budget Act to zero in 2008-2009. In 2009-2010, a budgetary deficit

of $3 174 million was recognized. From 2010-2011 to 2012-2013, the Québec government showed a

budgetary deficit related to the gradual deficit reduction objectives provided for in the Act. For

fiscal 2013-2014, the budget balance was in deficit by $2 824 million.

In addition, for fiscal 2012-2013, the budget balance within the meaning of the Balanced Budget Act was

in deficit by $1 600 million. In accordance with the Act, this result excludes the loss of $1 876 million

arising from discontinued operations following the closure of Hydro-Québec’s Gentilly-2 nuclear

generating station.


S T A T E M EN T S 2 0 13 - 2 0 1 4

33


Revenue

Change in consolidated revenue REVENUE BY SOURCE (in millions of dollars)

-

10 000

20 000

30 000

40 000

50 000

60 000

70 000

80 000

90 000

100 000

2004-2005 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 2010-2011 2011-2012 2012-2013 2013-2014

Total consolidated revenue Income and property taxes Consumption taxes

Federal government transfers Government enterprises Other revenue¹

(1) Other revenue includes revenue from duties and permits, miscellaneous revenue and Generations Fund revenue.

The Government's consolidated revenue rose from $60.2 billion to $93.2 billion from fiscal 2004-2005

to 2013-2014. The annual average growth of this revenue was 4.5%, while that of GDP was 3.3% over the

same period.

The own-source revenue of organizations in the health and social services and education networks has

been included in consolidated revenue ever since these networks were consolidated line by line

in 2009-2010. Such revenue, which amounts to roughly $4.0 billion, includes, among other things, school

property taxes, user contributions including tuition fees.

Total revenue grew constantly, except in 2008-2009, when a decrease was recorded for revenue from

income and property taxes.


34


Revenue (cont’d)

Change in consolidated revenue (cont’d)

Income and property taxes

Revenue from income and property taxes increased from 2004-2005 to 2007-2008. It decreased

in 2008-2009 and 2009-2010, due notably to the impact of the financial crisis and the recession on

reported income as well as the fiscal measures implemented under the economic action plan to support the

economy during the recession. The decline in income and property tax revenue also reflects the lowering

of personal income tax in 2008 and the impact of the other fiscal measures announced in the 2007-2008

to 2009-2010 budgets on corporate taxes. Income tax revenue resumed its upward progression,

reaching $39 865 million in 2013-2014. It grew by 4.7% per year on average from 2004-2005

to 2013-2014.

Consumption taxes

Revenue from consumption taxes increased from $12 357 million in 2004-2005 to $17 135 million

in 2013-2014. The average annual growth rate for the period was 3.9% owing to sustained growth in retail

sales, the successive one-percentage-point increases in the QST rate as of January 1, 2011 and

January 1, 2012, and the harmonization of the QST with the GST as of January 1, 2013 for financial

institutions. It has grown regularly since 2004-2005, except in 2009-2010 when it fell slightly.


Federal government transfer revenue rose from $9 939 million in 2004-2005 to $18 550 million

in 2013-2014. Federal government transfer revenue grew by an average of 7.0% per year over the period.

It thus increased from 2004-2005 to 2010-2011, despite the recognition in 2011-2012 of a decrease

resulting mainly from a decline in equalization revenue because of Québec’s relatively good economic

performance. Federal government transfer revenue grew in 2012-2013 and 2013-2014, notably because of

payments totalling $2 200 million in federal compensation for harmonization of the sales taxes.

Government enterprises

Revenue from government enterprises, which consists mainly of the results of Hydro-Québec,

Loto-Québec and the Société des alcools du Québec, went from $4 346 million in 2004-2005

to $5 430 million in 2013-2014. Revenue from government enterprises grew by an average of 2.5% per

year during that period.


S T A T E M EN T S 2 0 13 - 2 0 1 4

35


Revenue (cont’d)

Change in consolidated revenue (cont’d)

Other revenue

Lastly, other revenue grew substantially from 2004-2005 to 2013-2014 owing to, among other things:

the addition of user contributions and tuition fees following the line-by-line consolidation of

organizations in the health and social services and education networks as of 2009-2010;

the inclusion of new entities due to the change in status of certain bodies following the 2006-2007

accounting reform;

the rise in penalties and interest related to the increase in assessments made by the Agence du revenu

du Québec in recent years as part of efforts to fight tax evasion;

the taking into account of water-power royalties and the other Generations Fund revenue as of

January 1, 2007.


36


Expenditure

Change in consolidated expenditure EXPENDITURE BY MISSION (in millions of dollars)

-

10 000

20 000

30 000

40 000

50 000

60 000

70 000

80 000

90 000

2004-2005 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 2010-2011 2011-2012 2012-2013 2013-2014

Total consolidated expenditure Health and Social Services Education and Culture

Other missions¹ Debt Service

(1) Other missions include the “Economy and Environment”, “Support for Individuals and Families” and “Administration and Justice” missions.

Between 2004-2005 and 2013-2014, the Government's consolidated expenditure increased

by $34.1 billion, from $60.8 billion to $94.9 billion. The average annual growth of this spending

was 4.6%.

Consolidated expenditure has risen since 2009-2010 due to the line-by-line consolidation of organizations

in the health and social services and education networks. The impact of this spending on the annual deficit

has been offset by including the networks' own-source revenue in consolidated revenue. In 2009-2010,

consolidated expenditure increased by $3.7 billion.

Health and Social Services and Education and Culture

The expenditures of the “Health and Social Services” and “Education and Culture” missions have climbed

constantly, and this trend has been even more pronounced in the health sector. As at March 31, 2014, they

accounted for 59.2% of consolidated expenditure and, of that share, 37.5% was for the “Health and Social

Services” mission and 21.7% for the “Education and Culture” mission.


S T A T E M EN T S 2 0 13 - 2 0 1 4

37


Expenditure (cont’d)

Change in consolidated expenditure (cont’d)

Other missions

The expenditures of all the other missions have also increased in recent years, particularly because of:

the increase in spending related to investments in road network improvement, development and

maintenance and in transportation systems;

growth in spending on municipal affairs and the regions, particularly to improve access to housing,

contribute to the construction of water supply and sewer systems and to the treatment of municipal

wastewater in all Québec regions;

growth in financial support for childcare centres and other day care services;

the creation of new government bodies, such as the Société de financement des infrastructures

locales du Québec, to provide municipal bodies with financial assistance for carrying out their

infrastructure projects and the Green Fund, as part of measures to foster sustainable development and

offer financial support to organizations active in the environment field;

the increase in the budgets allocated to public safety, notably to cover costs related to the Sûreté du

Québec, correctional services and policing affairs;

the inclusion of new line-by-line consolidated entities due to the change in status of certain bodies,

particularly the Société de l’assurance automobile du Québec and the Société des établissements de

plein air du Québec;

the increase in the expense related to the allowance for doubtful accounts, owing to the increase in

assessments by the Agence du revenu du Québec as part of efforts to fight tax evasion.

Debt service

Debt service increased by an average of 3.8% per year between 2004-2005 and 2013-2014. It stood

at $10 598 million in 2013-2014.


38


Fixed assets

Change in the net book value of fixed assets (in millions of dollars)

11 81812 984

18 02619 193

21 960

41 828

46 751

51 822

56 68560 662

8 000

13 000

18 000

23 000

28 000

33 000

38 000

43 000

48 000

53 000

58 000

63 000

2004-2005 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 2010-2011 2011-2012 2012-2013 2013-2014

Before the accouting

reform

After the accounting

reform

Consolidated networks at

modified equity

valueAfter the accounting

reform

Line-by-line consolidated

networks

The net book value of fixed assets increased by $4.0 billion over the past year, from $56.7 billion as at

March 31, 2013 to $60.7 billion as at March 31, 2014. This shows that annual investments in fixed assets

have outstripped the related annual depreciation of the Government’s fixed assets as a whole. The

remaining useful life of fixed assets is thus better today than it was a few years ago.

Changes in the Government’s accounting policies have entailed two substantial increases in the net book

value of fixed assets in the past 10 years:

in 2006-2007, when it increased by $3.8 billion following the accounting reform, which changed the

status of certain organizations from that of a government enterprise to that of a line-by-line

consolidated non-budget-funded body;

in 2009-2010, when it rose by $16.8 billion on account of the book value of the stock of fixed assets

of organizations in the health and social services and education networks following the line-by-line

consolidation of these organizations.

Fixed assets can be broken down into several different categories, including complex networks,1 which

consist mainly of net investments in road infrastructure. Such investments accounted for 38.0% of the

total net book value of fixed assets as at March 31, 2014.

1 Please refer to page 138 of the consolidated financial statements.


S T A T E M EN T S 2 0 13 - 2 0 1 4

39


Gross debt

Government's gross debt FISCAL YEAR ENDED MARCH 31, 2014 (in millions of dollars)

Actual results

as at

March 31, 2014

Actual results

as at

March 31, 2013

Debts before deferred foreign exchange gains (losses) 181 032 173 576

Less

Debt contracted by the Financing Fund to finance government

enterprises and entities not included in the Government's

reporting entity (1 142) (1 479)

179 890 172 097

Plus

Pension plans and other employee future benefits 28 672 28 492

Less

Generations Fund (5 659) (5 238)

Gross debt including advance borrowings 202 903 195 351

Less

Advance borrowings (5 805) (3 485)

Gross debt 197 098 191 866

As a % of nominal GDP 54.0% 53.6%

Change in the Government’s gross debt (in millions of dollars)

136 894 139 728144 505

149 225152 514

163 318

173 436

183 384

191 866197 098

80 000

100 000

120 000

140 000

160 000

180 000

200 000

220 000

2004-2005 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 2010-2011 2011-2012 2012-2013 2013-2014

Consolidatednetworks at

modif ied equity

value

Line-by -line consolidated

networks


40


Gross debt (cont’d)

Since the line-by-line consolidation of the financial results of organizations in the health and social

services and education networks in 2009-2010, all debts contracted by these organizations have been

included in those of the Government. Previously, only the portion of debt contracted by these

organizations with bodies included in the Government’s reporting entity were taken into account. To take

the different accounting methods into account, the gross debt trend analysis has been presented in two

periods.


S T A T E M EN T S 2 0 13 - 2 0 1 4

41



Increase of the gross debt from 2005 to 2009

The gross debt, which stood at $136.9 billion as at March 31, 2005, reached $152.5 billion as at

March 31, 2009. This represents an increase of $15.6 billion, resulting mainly from:

investments, loans and advances of $7.3 billion some of which were made to government

enterprises;

investments of $6.3 billion by the Government in its fixed assets;

a $3.1-billion increase in the Government's investments in the health and social services and

education networks due notably to loans by Financement-Québec to finance their fixed assets.

In addition, the payments to the Generations Fund reduced the gross debt by nearly $2.0 billion.

Factors responsible for growth in the Government’s gross debt from 2005 to 2009 (in millions of dollars)

7 325 (47%)

6 261 (40%)

3 124 (20%)

-146 (-1%)

1 008 (6%)

-1 952 (-12%)

Investments, loans andadvances

Net fixed assets Net investment in thenetworks

Budgetary deficits(surplus)

Other factors¹ Generations Fund

Note: The data for 2009-2010 and thereafter are not included in this chart because, following the line-by-line consolidation of the health and social services and education networks, they were not comparable with the data for 2004-2005 to 2008-2009.

(1) Other factors include, in particular, the change in “Other accounts”, such as accounts receivable and accounts payable, and the change in the value of the debt in foreign currency.


42



Increase of the gross debt from 2009 to 2014

Once the gross debt as at March 31, 2009 had been restated, following the line-by-line consolidation of

organizations in the health and social services and education networks, it stood at $157.6 billion. It

amounted to $197.1 billion as at March 31, 2014. Accordingly, for fiscal 2009-2010 to 2013-2014, the

Government’s gross debt rose by $39.5 billion. This increase is due mainly to:

investments of $23.1 billion by the Government in its fixed assets;

budgetary deficits of $15.3 billion;

investments, loans and advances totalling $8.1 billion, some of which were made to government

enterprises.

The increase in the gross debt has been offset by:

the change in other factors (e.g. the change in “Other accounts”, such as accounts receivable and

accounts payable, and the change in the value of the debt in foreign currency) which lowered the

gross debt by $2.3 billion;

deposits in the Generations Fund, which brought the gross debt down by $4.7 billion.

Factors responsible for growth in the Government’s gross debt from 2009 to 2014 (in millions of dollars)

23 060

13 376

8 122

-2 259-4 707

1 876

23 060 (58%)

15 252 (39%)

8 122 (21%)

-2 259 (-6%)-4 707 (-12%)

Net fixed assets Budgetary deficits (surplus)¹ Investments, loans andadvances

Other factors² Generations Fund

(1) The budgetary deficits include the loss of $1 876 M arising from discontinued operations following the closure of the Gentilly-2 nuclear generating station in 2012-2013. The impact on the gross debt amounts to $1 407 M, which corresponds to the reduction in the dividend paid to the Government by Hydro-Québec.

(2) Other factors include, in particular, the change in “Other accounts”, such as accounts receivable and accounts payable, and the change in the value of the debt in foreign currency.


S T A T E M EN T S 2 0 13 - 2 0 1 4

43

7. Results of the indicator analysis

The financial indicator analysis aims primarily to clarify and explain the information contained in the

consolidated financial statements.

The Government presents eleven indicators to assess the state of its finances. These indicators are based

on those proposed by the Public Sector Accounting Board in statements of recommended practices.

Several indicators have been affected by the impact of the 2006-2007 accounting reform. This reform

made it possible to bring the Government’s accounting policies into complete conformity with Canadian

public sector accounting standards. It also made it possible to integrate the organizations in the health and

social services and education networks into the Government’s reporting entity, initially at modified equity

value and subsequently, in 2009-2010, on a line-by-line consolidation basis.

For the purposes of this section, gross domestic product (GDP) corresponds to nominal gross domestic

product.


44

7. Results of the indicator analysis (cont’d)

Indicator 1: Assets (financial and non-financial) to total liabilities

This indicator illustrates the extent to which the Government finances its current operations through

borrowings. A ratio of over 100% indicates that a surplus was accumulated in the past and that the value

of the Government's financial and non-financial assets is higher than that of its liabilities. A ratio of less

than 100% indicates that a deficit was accumulated in the past and that the value of the Government's

financial and non-financial assets is lower than that of its liabilities. An upward ratio illustrates a

favourable trend.

Financial and non financial assets (as a percentage of total liabilities)

36.9 36.8

44.2 45.4

44.1

45.6

48.2 49.4

50.3 50.9

30.0

32.0

34.0

36.0

38.0

40.0

42.0

44.0

46.0

48.0

50.0

52.0

54.0

2004-2005 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 2010-2011 2011-2012 2012-2013 2013-2014


reform

After theaccounting

reform

Before the accounting

reform


modified equity

value


networks

The ratio of financial and non-financial assets to total liabilities was 36.9% in 2004-2005. It rose to 45.6%

as at March 31, 2010 due to the accounting reform of 2006-2007 and the line-by-line consolidation of

organizations in the health and social services and education networks in 2009-2010. The ratio stood

at 50.9% as at March 31, 2014. Taking the accumulated deficit into account, the value of assets is still

lower than that of liabilities. In addition, an improvement can be observed in the ratio, showing that assets

have climbed at a faster rate than liabilities. Over the past eight years, borrowings have been used mainly

to finance fixed asset acquisitions.


S T A T E M EN T S 2 0 13 - 2 0 1 4

45


Indicator 2: Gross debt to total revenue

This indicator is intended to put the size of the Government's gross debt into perspective by comparing it

with the Government's revenue. A declining ratio indicates a decrease in the relative weight of the gross

debt.

Gross debt (as a percentage of total revenue)

227.5

219.2

207.6 204.1

208.7 207.8 209.3 212.6

218.4

211.4

180.0

190.0

200.0

210.0

220.0

230.0

240.0

250.0

260.0

270.0

2004-2005 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 2010-2011 2011-2012 2012-2013 2013-2014

Before the accounting

reform


reform


modified equity

value


reform


networks

(1)

(1) The increase in the ratio in 2012-2013 is due mainly to the recording of the loss of $1 876 M arising from discontinued operations following the closure of Hydro-Québec’s Gentilly-2 nuclear generating station, which reduced revenue accordingly. Excluding this loss, the ratio amounts to 213.9%.

From 2004-2005 to 2005-2006, gross debt as a percentage of total revenue fell from 227.5% to 219.2%.

From 2006-2007 to 2008-2009, the ratio went from 207.6% to 208.7%. From 2009-2010 to 2012-2013, it

rose from 207.8% to 218.4%. In 2013-2014, it decreased to 211.4%.


46


Indicator 3: Expenditures by mission to total expenditure

This indicator illustrates the trend in Government spending for a particular mission over time. To ensure

the sustainability of all programs, the growth of spending for a mission must not be substantially higher

than that of total spending.

Expenditures by mission (as a percentage of total expenditure)

0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

40.0

2004-2005 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 2010-2011 2011-2012 2012-2013 2013-2014

Health and Social Services Education and Culture Other missions¹ Debt Service

(1) Other missions include the “Economy and Environment”, “Support for Individuals and Families” and “Administration and Justice” missions.

The expenses of the “Health and Social Services” mission show an average annual progression of 5.5%

from 2004-2005 to 2013-2014, compared with 4.6% for total consolidated expenditure, such that the

proportion of this mission's expenses in expenditures as a whole rose from 35.2% to 37.5%. This indicator

reflects the growing importance of expenditures for the “Health and Social Services” mission. It also

reflects the ever-growing needs entailed, among other things, by the aging of the population.

This indicator shows that the proportion of expenditures devoted to the “Education and Culture” mission

has remained fairly stable, going from 20.8% to 21.7%. Regarding the other mission expenditures, their

share to total expenditure went from 31.7% in 2004-2005 to 29.6% in 2013-2014.

The share of total spending devoted to “Debt service” fell from 12.2% in 2004-2005 to 11.2%

in 2013-2014. During that period, the average annual growth in “Debt service” was 3.8% compared

with 4.8% in the case of consolidated expenditure excluding debt service.


S T A T E M EN T S 2 0 13 - 2 0 1 4

47


Indicator 4: Gross debt to GDP

This indicator puts the Government's gross debt and its ability to pay into perspective, as measured by

GDP. It is desirable that this ratio follow a downward trend as this reflects a decline in the relative weight

of the gross debt.

Gross debt (as a percentage of GDP)

50.4 49.8 49.7

48.8 48.6

51.8 52.6

53.1 53.6 54.0

44.0

46.0

48.0

50.0

52.0

54.0

56.0

58.0

60.0

2004-2005 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 2010-2011 2011-2012 2012-2013 2013-2014

Consolidated networks at modified

equity value

Line-by -lineconsolidated networks

The ratio of gross debt to GDP improved from 50.4% to 48.6% from 2004-2005 to 2008-2009.

In 2009-2010, it stood at 51.8% on the basis of the line-by-line consolidation of the health and social

services and education networks. It amounts to 54.0% in 2013-2014.


48


Indicator 5: Debt representing accumulated deficits to GDP

This indicator compares the debt representing accumulated deficits, or the debt not used to finance assets,

with the Government's ability to pay, as measured by GDP. It is desirable that this ratio follow a

downward trend as this means that the relative weight of the debt representing accumulated deficits is on

the decline.

Debt representing accumulated deficits (as a percentage of GDP)

32.132.7

33.1

31.0

32.8

34.634.0

33.433.0 32.8

30.0

32.0

34.0

36.0

38.0

40.0

42.0

44.0

46.0

2004-2005 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 2010-2011 2011-2012 2012-2013 2013-2014

Before the accounting reform

After the accounting reform


Line-by -line consolidatednetworks


equity value

Note: Before taking into account the stabilization reserve.

From 2004-2005 to 2005-2006, the ratio of the debt representing accumulated deficits to GDP went

from 32.1% to 32.7%. From 2006-2007 to 2008-2009, it went from 33.1% to 32.8%. From 2009-2010

to 2013-2014, the ratio of the debt representing accumulated deficits to GDP decreased, from 34.6%

to 32.8%.


S T A T E M EN T S 2 0 13 - 2 0 1 4

49


Indicator 6: Consolidated expenditure to GDP

This indicator makes it possible to compare, over time, the growth rate of government spending with that

of the economy. A decline in this indicator means that spending is growing less rapidly than the economy.

Therefore, this indicator reveals the relative weight of the cost of public services in the economy.

Expenditures (excluding debt service) (as a percentage of GDP)

19.7 20.0

20.3 20.5

21.1

23.4 23.1

22.8 22.5

23.1

19.0

20.0

21.0

22.0

23.0

24.0

25.0

26.0

2004-2005 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 2010-2011 2011-2012 2012-2013 2013-2014


After the accountingreform


Line-by -line consolidated networks


equity value

Expenditures excluding debt service as a percentage of GDP increased slightly between 2004-2005

and 2007-2008, going from 19.7% to 20.5%. In 2008-2009, the ratio rose to 21.1% because, particularly,

of weak growth in GDP.

Since fiscal 2009-2010, following the line-by-line consolidation of organizations in the health and social

services and education networks, consolidated expenditure has incorporated the networks’ expenditures as

a whole, which largely explains why the ratio rose to 23.4%. It is on this basis that the Government kept

spending growth above GDP in order to continue supporting the economy and maintain public services

during the recession. Spending grew at a rate below that of GDP from 2010-2011 to 2012-2013, with the

result that its relative weight in the economy fell. It went from 23.1% to 22.5% in 2012-2013.

In 2013-2014, the rate rose to 23.1%, particularly because of weak growth in GDP (2.0%) whereas

expenditure increased by 4.7%.


50


Indicator 7: Debt service to total revenue

This indicator illustrates the share of government revenue that must be allocated to debt service. It is

desirable that this ratio follow a downward trend since this means that a larger share of revenue can be

devoted to program spending.

Debt service (as a percentage of total revenue)

12.4 11.9

12.5 12.0

11.1

10.0

10.8 11.0 11.2 11.4

8.0

10.0

12.0

14.0

16.0

18.0

20.0

2004-2005 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 2010-2011 2011-2012 2012-2013 2013-2014






equity value

Overall, the proportion of budgetary revenue devoted to debt service has fallen since 2004-2005.

In 2004-2005, the debt service to total revenue ratio was 12.4%. In 2009-2010, it stood at 10.0%, taking

into account the line-by-line consolidation of organizations in the health and social services and education

networks. In 2013-2014, it stood at 11.4%.


S T A T E M EN T S 2 0 13 - 2 0 1 4

51


Indicator 8: Net book value of fixed assets to the cost of fixed assets

This indicator shows the extent to which the estimated remaining useful life of tangible assets will enable

the Government to supply products and services in the future.

Net book value of fixed assets (as a percentage of the cost of fixed assets)

46.1 46.9

52.3 51.9

54.7 53.6

55.1 56.1

57.0 57.3

35.0

40.0

45.0

50.0

55.0

60.0

2004-2005 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 2010-2011 2011-2012 2012-2013 2013-2014






equity value

The net book value to the cost of fixed assets indicator has risen significantly over the past 10 years,

from 46.1% as at March 31, 2005 to 57.3% as at March 31, 2014. This shows that annual investments in

fixed assets have outstripped the annual depreciation of the Government’s fixed assets as a whole. The

average age and the remaining useful life of fixed assets are thus better today than they were a few years

ago.


52


Indicator 9: Own-source revenue to GDP

This indicator shows the proportion of collective wealth that the Government must collect in order to fund

public services. The Government's own-source revenue consists of income tax and other taxes, user fees

and other revenue derived from its enterprises in particular. This revenue includes all of the Government's

revenue, apart from transfers received from the federal government. A decline in this ratio over time tends

to indicate that more created wealth is directly available to taxpayers.

Own-source revenue (as a percentage of GDP)

18.518.8

19.8

19.1

18.5

19.519.8

20.019.7

20.5

17.0

18.0

19.0

20.0

21.0

22.0

23.0

24.0

2004-2005 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 2010-2011 2011-2012 2012-2013 2013-2014




Line-by -line consolidatednetworks


equity value

(1)

(1) The decline of the ratio in 2012-2013 is due mainly to the recording of the loss of $1 876 M arising from discontinued operations following the closure of the Hydro-Québec’s Gentilly-2 nuclear generating station, which reduced revenue accordingly. Excluding this loss, the ratio amounts to 20.2%.

Own-source revenue to GDP remained fairly stable from 2004-2005 to 2005-2006, going from 18.5%

to 18.8%. The increase in the ratio to 19.8% in 2006-2007 was due in large part to Hydro-Québec’s

additional earnings, resulting from the sale of its interest in certain enterprises. Over the following years,

the ratio dropped, reaching 18.5% in 2008-2009, mainly because of the impact of the recession. The ratio

rose to 19.5% in 2009-2010, owing to the increase in own-source revenue caused by the line-by-line

consolidation of organizations in the health and social services and education networks. It rose to 20.0%

in 2011-2012 due to the increase in revenue required to restore fiscal balance. It decreased slightly

in 2012-2013, to 19.7% due mainly to the loss arising from discontinued operations following the closure

of the Gentilly-2 nuclear generating station. In 2013-2014, it increased to 20.5%.


S T A T E M EN T S 2 0 13 - 2 0 1 4

53


Indicator 10: Transfers from the federal government to total revenue

Transfers received from the federal government comprise equalization payments, payments from transfers

for health care and for post-secondary education and other social programs, and amounts transferred by

the federal government under various agreements. This indicator measures the portion of the Québec

government's revenue that comes from the federal government.

Federal government transfers (as a percentage of total revenue)

16.5

17.4 17.2

20.120.6

21.8

21.1

19.8 19.9 19.9

13.0

15.0

17.0

19.0

21.0

23.0

25.0

2004-2005 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 2010-2011 2011-2012 2012-2013 2013-2014






equity value

The proportion of federal government transfers in total revenue remained fairly stable from 2004-2005 to

2006-2007, going from 16.5% to 17.2%. In 2007-2008, the proportion of federal government transfers in

total revenue rose to 20.1% owing notably to a thorough reform of the equalization program. The

proportion reached 21.8% in 2009-2010 particularly because of the incorporation of organizations in the

health and social services and education networks and the increase in funds transferred by the federal

government under various agreements. In 2011-2012, the proportion decreased to 19.8% mainly due to a

decline in equalization revenue stemming from Québec’s relatively good economic performance. Since

2012-2013, the proportion of federal government transfers in total revenue has stood at 19.9%.


54


Indicator 11: Debt in foreign currency to gross debt

This indicator illustrates the degree to which the Government’s debt service may be affected by

fluctuations in the Canadian dollar. A downward trend in the proportion of debt in foreign currency

means that the vulnerability of debt service is on the decline.

Debt in foreign currency (as a percentage of gross debt)

7.9

6.85.8

7.0 6.7

3.3

0.5 0.2 0.0 0.0

-3.0

0.0

3.0

6.0

9.0

12.0

15.0

2004-2005 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 2010-2011 2011-2012 2012-2013 2013-2014



equity value

Note: Gross debt including advance borrowings.

From 2004-2005 to 2008-2009, the proportion of the debt in foreign currency fell, from 7.9% as at

March 31, 2005 to 6.7% as at March 31, 2009. The proportion has fallen even further since 2009-2010,

from 3.3% as at March 31, 2010 to 0% as at March 31, 2014, with the result that debt service is no longer

vulnerable to fluctuations in the Canadian dollar relative to the currencies in which the Government holds

part of its debt.


S T A T E M EN T S 2 0 13 - 2 0 1 4

55

APPENDIX 1

Financial statistics

These tables present the historical data for certain consolidated financial statement items over the past 17

years: these data correspond to those determined at the time of their original publication. However, a

number of adjustments or reclassifications have been made to “Revenue” and “Expenditure” in order to

present them according to the budgetary structure in effect for 2013-2014 and render them comparable

with the historical data presented in the most recent budget plan.

Historical data for consolidated financial statement items FISCAL YEAR ENDED MARCH 31 (in millions of dollars)

Fiscal year Revenue Expenditure

(Deficit) or surplus(1)

Financial assets Liabilities Net debt(2)

Non-financial assets(3)

Accumulated deficits(4)

2013-2014 93 231 94 934 (1 703) 62 701 (243 962) (181 261) 61 372 (119 889)

2012-2013 87 997 90 512 (2 515) 62 015 (237 502) (175 487) 57 392 (118 095)

2011-2012 86 410 88 198 (1 788) 60 060 (227 171) (167 111) 52 989 (114 122)

2010-2011 82 863 85 253 (2 390) 56 345 (215 634) (159 289) 47 387 (111 902)

2009-2010 78 604 81 544 (2 940) 49 235 (199 335) (150 100) 42 483 (107 617)

Before the line-by-line consolidation of network organizations(5)

2008-2009 73 227 74 485 (1 258) 53 532 (182 325) (128 793) 30 767 (98 026)

2007-2008 73 126 71 476 1 650 49 016 (173 334) (124 318) 30 147 (94 171)

2006-2007 69 609 67 616 1 993 47 732 (169 923) (122 191) 26 432 (95 759)

Before the reform of government accounting(6)

2005-2006 63 763 63 726 37 40 355 (145 038) (104 683) 12 984 (91 699)

2004-2005 60 204 60 868 (664) 39 258 (138 300) (99 042) 11 818 (87 224)

2003-2004 57 548 57 906 (358) 35 962 (132 987) (97 025) 10 735 (86 290)

2002-2003 55 124 55 852 (728) 37 071 (132 528) (95 457) 9 716 (85 741)

2001-2002 52 560 53 488 (928) 34 332 (126 593) (92 261) 8 161 (84 100)

2000-2001 53 075 51 698 1 377 38 620 (126 828) (88 208) 7 166 (81 042)

1999-2000 49 332 49 325 7 35 284 (124 170) (88 886) 6 693 (82 193)

1998-1999 48 617 48 491 126 34 898 (123 359) (88 461) 6 233 (82 228)

1997-1998 44 097 46 254 (2 157) 27 016 (115 420) (88 404) 5 980 (82 424)

(1) The budget balance within the meaning of the Balanced Budget Act is presented in table 1.3 (p. 60).

(2) The net debt represents liabilities minus the financial assets presented in the consolidated statement of financial position.

(3) Table 1.1 (p. 56) presents the breakdown of the annual change in non-financial assets.

(4) Table 1.2 (p. 57 to 59) presents the breakdown of the annual change in accumulated deficits attributable to the comprehensive income of enterprises and to accounting changes.

(5) Judgment must be exercised in comparing the data for 2009-2010 and thereafter with those for prior years because of the impact of the line-by-line consolidation of organizations in the health and social services and education networks.

(6) Judgment must be exercised in comparing the data for 2006-2007 and thereafter with those for prior years because of the impact of the December 2007 accounting reform.


56

APPENDIX 1

Financial statistics (cont’d)

Table 1.1 – Breakdown of the annual change in non-financial assets FISCAL YEAR ENDED MARCH 31 (in millions of dollars)

Fiscal year

Current year change Ajustements of the balance of non-financial assets(1)

Total change for fiscal year

Net book value of fixed

assets

Inventories and prepaid

expenses Net investment in the networks

Net book value of fixed

assets

Inventories and prepaid

expenses Net investment in the networks

2013-2014 3 977 3 3 980

2012-2013 4 863 49 (279) (2) (230) (3) 4 403

2011-2012 5 350 252 5 602

2010-2011 4 923 (19) 4 904

2009-2010 4 226 83 16 112 (4),(5) 334 (5) (9 039) (5) 11 716

2008-2009 2 297 46 622 (290) (6) (2 055) (7) 620

2007-2008 1 457 30 487 1 639 (8) 102 (8) 3 715

2006-2007 1 219 10 1 002 2 184 (9) 152 (10) 8 881 (11) 13 448

2005-2006 1 166 1 166

2004-2005 1 083 1 083

2003-2004 1 019 1 019

2002-2003 1 482 73 (12) 1 555

2001-2002 995 995

2000-2001 473 473

1999-2000 359 101 (13) 460

1998-1999 217 36 (14) 253

1997-1998 199 5 781 (15) 5 980

(1) The opening balance for non-financial assets was changed due to accounting changes and data reclassifications.

(2) The change in the transfer revenue accounting policies led to a $249-million downward adjustment in fixed assets.

(3) The decrease stems from the change to the transfer spending accounting policy, which resulted in certain prepaid expenses being charged to expenditure.

(4) The increase stems from the adoption of a component-based approach for capitalizing and amortizing the cost of road infrastructure fixed assets.

(5) The incorporation of organizations in the health and social services and education networks using the line-by-line consolidation method instead of the modified equity method increased fixed assets by $15 642 M and inventories and prepaid expenses by $420 M. In addition, the net investment in the networks was eliminated because of the line-by-line consolidation of these organizations.

(6) The decrease stems from the harmonization of the accounting policies of Immobilière SHQ with those of the Government, in regard to the amortization of the cost of fixed assets in results.

(7) The decrease stems from the harmonization of the accounting policies used by organizations in the health and social services network and by school boards with those of the Government, particularly in regard to the recording of fixed assets and the full application of accrual accounting to the revenue and expenditure of these organizations.

(8) The increase stems from the line-by-line consolidation of Immobilière SHQ, following the change in its status as an enterprise.

(9) The increase stems from the line-by-line consolidation of certain bodies ($2 240 M), following the change in their status as an enterprise. The increase is reduced by a $56 M rise in the accumulated amortization of the Agence métropolitaine de transport following a review of its amortization policy.

(10) The increase stems from the recording of the opening balance of inventories and prepaid expenses, as part of the 2006-2007 accounting reform.

(11) The increase stems from the inclusion in the Government's reporting entity of organizations in the health and social services and education networks, as part of the 2006-2007 accounting reform.

(12) The increase stems from the capitalization of the cost of improvements to the premises of the Société Immobilière du Québec ($57 M) and the line-by-line consolidation of a body ($16 M), following the change in its status as an enterprise.

(13) The increase stems from the revaluation of fixed assets recorded as part of the 1997-1998 accounting reform.

(14) The increase stems from the capitalization of cadastral plan expenses.

(15) The increase stems from the recording of the opening balance of fixed assets as part of the 1997-1998 accounting reform.


S T A T E M EN T S 2 0 13 - 2 0 1 4

57

APPENDIX 1


Table 1.2 – Breakdown of the annual change in accumulated deficits attributable to the comprehensive income of enterprises and to accounting changes

FISCAL YEAR ENDED MARCH 31 (in millions of dollars)

Fiscal year

Enterprises comprehensive

income and other(1)

Restatements of accumulated deficits

Total for other

factors Restatement details Government enterprises

Departments and bodies

2013-2014 (80) (11) — (91) Government enterprises: ($11 M) to comply with the new requirements of International Financial Reporting Standard IAS 19 – Employee Benefits.

2012-2013 (360) — (1 098) (1 458) Departments and bodies: ($988 M) for the accounting policy change made to take into account the recommendations of the revised accounting standard on government transfers (PS 3410) of the Public Sector Accounting Board (PSAB); ($110 M) to take into account the improvements to the method used to calculate tax revenue allowances.

2011-2012 (376) (56) — (432) Government enterprises: ($56 M) in order to comply with International Financial Reporting Standards (IFRS).

2010-2011 (229) (253) (1 413) (1 895) Government enterprises: ($95 M) for obligations related to the decommissioning of fixed assets, ($158 M) for complying with International Financial Reporting Standards (IFRS).

Departments and bodies: ($1 413 M) for contaminated land remediation obligations recorded as environmental liabilities.

2009-2010 (452) (3 749) (2 450) (6 651) Government enterprises: ($3 758 M) for adopting the straight-line method for tangible fixed assets to replace a method not recognized by International Financial Reporting Standards (IFRS); $9 M for various items.

Departments and bodies: ($1 234 M) for harmonizing the accounting policies of organizations in the health and social services and education networks with those of the Government to make it easier to incorporate these organizations into the Government's consolidated financial statements using the line-by-line consolidation method; $431 M for adopting a component-based approach for capitalizing and amortizing the cost of road infrastructure fixed assets; ($683 M) for contaminated land remediation obligations recorded as environmental liabilities; ($1 129 M) for changing the valuation basis for calculating interest on the pension plans; and $165 M for changing the method used to record personal income tax collected by the federal government on behalf of Québec.

2008-2009 111 — (2 708) (2 597) Departments and bodies: ($2 055 M) for harmonizing the accounting policies of organizations in the health and social services and education networks with those of the Government; ($290 M) for harmonizing the accounting policies of Immobilière SHQ with those of the Government in regard to the recognition of the cost of its fixed assets under results; ($193 M) for the change in the amortization period for the actuarial gains and losses of certain pension plans; and ($170 M) for contaminated land remediation obligations recorded as environmental liabilities.

2007-2008 303 (20) (345) (62) Government enterprises: ($28 M) for the change to the accounting policy for recording financial instruments; $8 M for a change concerning employee future benefits.

Departments and bodies: ($345 M) for contaminated land remediation obligations recorded as environmental liabilities.

(1) Since fiscal 2006-2007, these data have corresponded to the comprehensive income of government enterprises. For 2001-2002 to 2005-2006, they corresponded to the foreign exchange translation adjustment, and for 1997-1998 to 1999-2000, to the surplus of the municipal assessment for fixed assets of the Corporation d’hébergement du Québec.


58

APPENDIX 1


Table 1.2 – Breakdown of the annual change in accumulated deficits attributable to the comprehensive income of enterprises and to accounting changes (cont’d)


Fiscal year


income and other(1)


Total for other

factors Restatement details Government enterprises


2006-2007 11 830 (6 894) (6 053) Government enterprises: Change to the accounting policy for recording financial instruments.

Departments and bodies: ($6 426 M) for the accounting reform, i.e. ($3 220 M) for including in the Government's reporting entity the vast majority of organizations in the health and social services and education networks; ($1 904 M) for recording revenue from income and property taxes, consumption taxes and duties and permits using the accrual method; ($484 M) for reevaluating the time when transfer expenditures should be recognized; ($335 M) for recognizing the grant portion arising from significant concessionary terms awarded for investments and loans granted; ($125 M) for the change to the policies for recording the Retirement Plans Sinking Fund; ($708 M) for applying the standards for financial instruments; $152 M for the change to the accounting policy for recording inventories and prepaid expenses; $198 M for the other components of the reform; and ($468 M) for the change to the accounting policy for contaminated land remediation obligations recorded as environmental liabilities.

2005-2006 24 (25) (4 511) (4 512) Government enterprises: ($25 M) for various items.

Departments and bodies: ($3 384 M) for the change to the accounting policy for revenue from federal government transfers; ($270 M) for the change in the application of the accounting policy for the allowance for losses on guaranteed financial initiatives; ($264 M) for the new actuarial valuations of the pension plans; ($552 M) for the change in the recording of revenue from registration fees; and ($41 M) for harmonizing the accounting policies of consolidated organizations.

2004-2005 3 — (273) (270) Departments and bodies: ($126 M) for the reassessment of school board subsidies and ($147 M) for the correction to the allowance for doubtful accounts.

2003-2004 (40) (4) (147) (191) Government enterprises: ($4 M) for various items.

Departments and bodies: ($96 M) for the change to one of the terms of application of the accounting policy for debts and ($51 M) for the adjustment to the accounts receivable of a consolidated body.

2002-2003 (122) (421) (370) (913) Government enterprises: ($363 M) relating to the capping mechanism used in calculating deferred gains and losses on the basis of the real rate of return assumption at the Société d’assurance automobile du Québec and ($58 M) for other items.

Departments and bodies: ($215 M) for correcting the error made by the Canada Customs and Revenue Agency; ($177 M) for recording employer contributions in respect of obligations relating to sick leave and vacations; and ($14 M) for other items; $36 M for the change made in 2003-2004 to one of the terms of application of the accounting policy for debts. In this regard, expenditure for fiscal 2002-2003 was restated by $36 M.

2001-2002 88 (2 218) — (2 130) Government enterprises: ($1 306 M) for foreign currency translation and ($912 M) for the introduction of a provision for deviations in the real rate of return.



S T A T E M EN T S 2 0 13 - 2 0 1 4

59

APPENDIX 1


Table 1.2 – Breakdown of the annual change in accumulated deficits attributable to the comprehensive income of enterprises and to accounting changes (cont’d)


Fiscal year


income and other(1)


Total for other factors Restatement details



2000-2001 — (173) (53) (226) Government enterprises: ($235 M) following the adoption of Canadian accounting standards and $62 M for the change to the accounting policies for certain allowances and the actuarial liability.

Departments and bodies: ($12 M) for sick leave and vacations and ($41 M) for the change to the accounting policy for recording certain building repair and upgrading expenditures.

1999-2000 26 16 (14) 28 Government enterprises: $16 M following the adoption of Canadian accounting standards by the Corporation d’hébergement du Québec in 2000-2001. In this regard, revenue for 1999-2000 was restated by the same amount.

Departments and bodies: $101 M for the reassessment of fixed assets following the 1997-1998 accounting reform and ($122 M) for other items; $7 M for the change made in 2000-2001 to the accounting policy concerning the recording of certain expenditures for the upgrading and repair of immovables. In this regard, expenditures for 1999-2000 was restated by $7 M.

1998-1999 7 — 63 70 Departments and bodies: $27 M for the accounting change in the recording of foreign exchange forward contracts and $36 M for capitalizing cadastral plan expenses.

1997-1998 24 — (15 421) (15 397) Departments and bodies: ($13 173 M) for recording unrecorded pension plan obligations; ($6 693 M) for consolidating government enterprises, bodies and special funds; ($731 M) for the change to the method used to record borrowings; ($461 M) for recording public sector restructuring measures; and $5 637 M for recording fixed assets.



60

APPENDIX 1


Table 1.3 – Budget balance within the meaning of the Balanced Budget Act FISCAL YEAR ENDED MARCH 31 (in millions of dollars)

Fiscal

year

(Deficit) or

surplus

Generations

Fund

Accounting

changes(1)

Use (allocation) of

the reserve Others

Budget

balance(2)

2013-2014 (1 703) (1 121) (2 824)

2012-2013 (2 515) (961) 1 876 (3) (1 600)

2011-2012 (1 788) (840) (2 628)

2010-2011 (2 390) (760) (3 150)

2009-2010 (2 940) (725) 58 433 (3 174)

2008-2009 (1 258) (587) 1 845 —

2007-2008 1 650 (449) (1 201) —

2006-2007 1 993 (584) (1 300) 109

Before the reform of government accounting(4)

2005-2006 37 37

2004-2005 (664) (664)

2003-2004 (358) (358)

2002-2003 (728) (5) (728)

2001-2002 (928) 950 22

2000-2001 1 377 (950) 427

(1) The Balanced Budget Act stipulates that the budget balance must:

a) take into account the impact of the accounting changes, for periods after March 31, 2006, charged directly to the accumulated deficit. This rule does not apply to accounting changes resulting from the implementation of the 2006-2007 accounting reform;

b) not include the impact of the application of a new Canadian Institute of Chartered Accountants standard during a period prior to the changeover date proposed by the Institute.

(2) The budget balance was determined in accordance with the Balanced Budget Act.

(3) The Balanced Budget Act provides for the exclusion, in the calculation of the budget balance for fiscal 2012-2013, of the result arising from discontinued operations following the decision to close the Gentilly-2 nuclear generating station, presented in Hydro-Québec’s annual consolidated financial statements.

(4) Judgment must be exercised in comparing the data for 2006-2007 and thereafter with those for prior years because of the impact of the December 2007 accounting reform.

(5) The deficit for 2002-2003 was adjusted by $34 M in subsequent years to take restatements into account.


S T A T E M EN T S 2 0 13 - 2 0 1 4

61

APPENDIX 2

Information by reporting sector

AS AT MARCH 31, 2014

Consolidated operations include financial information from numerous departments, bodies, funds and

enterprises. The Government’s financial framework presents consolidated financial forecasts for the

revenue and expenditure of all of these entities, grouped by sector according to their control and

accountability relationship with the Government. Criteria such as ministerial accountability, legal

framework, scope of authority delegated to management, funding method, degree of autonomy and nature

of activities are used to classify the entities in the different sectors.

The following tables report on the operations of each of the sectors identified in the Government’s

financial framework. Since it was possible to associate all revenue and expenditure items with a specific

sector, it was not necessary to use allocation methods to allocate some of the items among two or more

specific sectors.


62

APPENDIX 2

Information by reporting sector (cont’d)


Consolidated statement of operations by sector (in millions of dollars)

General fund(2)

Tax-funded

transfers(3)

Government

enterprises(4)

Special

funds(5)

Specified

purpose

accounts(6)

REVENUE

Income and property taxes 29 433 6 122 0 1 845 0

Consumption taxes 16 607 195 0 2 385 0

Duties and permits 314 0 0 1 524 0

Miscellaneous revenue 1 458 0 0 1 485 198

Other revenue sources 0 0 5 430 0 0

Dividends paid by enterprises 4 265 0 (4 265) 0 0

Total own-source revenue 52 077 6 317 1 165 7 239 198

Québec government transfers 0 0 0 1 973 0

Federal government transfers 16 528 0 0 545 813

Total revenue 68 605 6 317 1 165 9 757 1 011

EXPENDITURE 0 0 0 0 0

Health and Social Services 31 088 471 0 1 570 162

Education and Culture 17 319 390 0 101 76

Economy and Environment 5 271 1 649 0 4 660 696

Support for Individuals and Families 6 313 3 155 0 367 8

Administration and Justice 4 331 652 0 1 557 69

Sub-total 64 322 6 317 ─ 8 255 1 011

Debt service 8 434 0 0 1 204 0

Total exenditure 72 756 6 317 ─ 9 459 1 011

ANNUAL SURPLUS (DEFICIT) (4 151) ─ 1 165 298 ─

Consolidated Revenue Fund (1)


S T A T E M EN T S 2 0 13 - 2 0 1 4

63

APPENDIX 2

Generations

Fund(7)

Non-budget-

funded bodies(8)

Organizations in the

health and social

services networks(9)

Organizations in

the education

networks(9)

Consolidation

adjustments(10)

Consolidated

results

0 68 0 1 793 604 39 865

0 118 0 0 (2 170) 17 135

0 417 0 0 (57) 2 198

5 808 2 331 1 580 (3 928) 8 932

1 121 0 0 0 0 6 551

0 0 0 0 0 ─

1 121 6 411 2 331 3 373 (5 551) 74 681

0 11 965 20 660 11 652 (46 250) ─

0 985 113 170 (604)(11)

18 550

1 121 19 361 23 104 15 195 (52 405) 93 231

0 0 0 0 0 0

0 11 321 22 744 0 (31 754) 35 602

0 479 0 14 781 (12 526) 20 620

0 3 463 0 0 (3 880) 11 859

0 181 0 0 (481) 9 543

0 2 758 0 1 (2 656) 6 712

─ 18 202 22 744 14 782 (51 297) 84 336

0 1 074 342 492 (948) 10 598

─ 19 276 23 086 15 274 (52 245) 94 934

1 121 85 18 (79) (160) (1 703)


64

APPENDIX 2

Information by reporting sector (cont’d)


(1) The Consolidated Revenue Fund consists of money collected or received from various sources over which the Parliament of Québec has the power of appropriation. The fund comprises a general fund and special funds.

(2) The general fund consists of money paid into the Consolidated Revenue Fund that has not been credited to a special fund under legislative provisions, as well as the expenditures of the National Assembly, persons appointed by it, departments and bodies administered by a minister whose budget is financed by appropriations allocated by the National Assembly. As stipulated in the Act respecting the Agence du revenu du Québec (CQLR, chapter A-7.003), tax revenue administered by the Agence du revenu du Québec on behalf of the Government is reduced by the related allowances for doubtful accounts. In addition, income and property tax revenue is reduced by the refundable tax credits provided for in the Taxation Act (CQLR, chapter I-3); since, within the meaning of the Act, these credits are payments on account of tax payable or, overpayments of tax payable. This sector also includes the activities of the Health Services Fund.

(3) Tax revenue used to finance doubtful accounts related to this revenue and transfer expenditures made through the tax system are not subject to the allocation of appropriations by the National Assembly and are the focus of a specific reporting sector. A transfer expenditure made through the tax system is a refundable tax credit that provides a taxpayer with a financial benefit for a purpose other than that of reducing the taxes that the taxpayer would otherwise have been required to pay to the Government.

(4) Government enterprises are distinct legal entities that have the power to carry out commercial activities. The sale of their goods or delivery of their services target individuals or organizations not included in the Government's reporting entity. Therefore, these enterprises are financially autonomous in that their revenue from outside the reporting entity ensures that they carry out their activities and repay their debts on their own. Since their accounts are accounted for using the modified equity method, only their net surpluses for the fiscal year are presented in the table, after deducting the dividends paid into the general fund.

(5) A special fund is a fund established by an Act to provide for certain financial commitments of a minister, a budget-funded body or a non-budget-funded body exercising an adjudicative function. Legislative provisions determine which sums paid into the Consolidated Revenue Fund must be credited to a special fund. The results of the special funds do not include the activities of the Health Services Fund and the Generations Fund.

(6) A specified purpose account is a financial management mechanism created by a Government order in council under legislative provisions. It allows a department to account in a distinct way for funds paid into the Consolidated Revenue Fund by a third party under a contract or an agreement that provides for the allocation of the funds to a specific purpose.

(7) The Generations Fund, created under the Act to reduce the debt and establish the Generations Fund (CQLR, chapter R-2.2.0.1), differs from other funds in that it is dedicated exclusively to repaying the Government's debt.

(8) Non-budget-funded bodies depend in whole or in part on departments for their funding. However, non-budget-funded bodies have more autonomy than those funded by budgetary appropriations. Although non-budget-funded bodies also answer to a minister, the legislation grants their management more extensive funding and operating powers.

(9) The health and social services network includes health and social services agencies and public health and social services institutions (hospital centres, health and social services centres, rehabilitation centres, child and youth protection centres).

The education networks are made up of the school board network, the general and vocational college (CEGEP) network and the Université du Québec and its constituent universities network.

All of these organizations, which are funded largely through budgetary appropriations, are autonomous in regard to the delivery of public services. They are legal entities that are vested with the financial and administrative powers needed to provide public services, and they have a board of directors made up of elected or appointed local representatives from the area or sector served by each organization. In addition, the Government's ability to dispose of their assets is subject to major restrictions.

(10) Consolidation adjustments stem mainly from the elimination of transactions and balances between entities in the different sectors. Therefore, the revenues and expenses of each sector are presented prior to the elimination of these items. However, transactions and balances between entities within the same sector are eliminated before the segment amounts are determined.

(11) The Québec government receives federal government transfer revenue that must be used for the purposes prescribed by the federal government in accordance with contracts or agreements entered into between the two parties. These funds are collected by the general fund and accounted for in specific purpose accounts; they are then paid to recipients when the latter become eligible. Consolidation adjustments are made to eliminate the federal transfer revenue related to the sums paid by the general fund to bodies included in the government’s reporting entity.


65

APPENDIX 3

Glossary

The following terms are used in the sections “Analysis of the consolidated financial statements” and

“Consolidated financial statements” contained in this volume.

Accrual basis of accounting

The accrual basis of accounting is an accounting method that involves taking into account, in determining

an entity’s net results, the revenues the entity earned and the expenditures it incurred during a fiscal year

without considering the moment the transactions were settled through cash receipts or disbursements or in

any other manner.

Advance borrowings

Advance borrowings are borrowings made by the general fund of the Consolidated Revenue Fund in a

fiscal year to meet its financial requirements in the next fiscal year.

Budget balance

The budget balance and its calculation method are defined in the Balanced Budget Act

(CQLR, chapter E-12.00001).

The budget balance measures the attainment of a balanced budget. For a given fiscal year, it is the result

of the difference between the revenue and expenditure determined in accordance with the Government’s

accounting policies and taking into account the following adjustments:

Items not included in the budget balance:

i) the revenue and expenditure recorded in the Generations Fund;

ii) certain retroactive adjustments to revenue from government enterprises;

iii) for fiscal 2012-2013, the result arising from discontinued operations following the decision to

close the Gentilly-2 nuclear generating station, presented in Hydro-Québec’s annual

consolidated financial statements.

Items included in the budget balance:

i) entries charged directly to the accumulated deficit, except for those resulting from:

(1) the retroactive effect of any new Canadian Institute of Chartered Accountants standard

for the years preceding the changeover year proposed by the Institute,

(2) accounting changes resulting from the 2006-2007 accounting reform appearing in the

public accounts;

ii) any amount needed from the stabilization reserve to maintain a balanced budget.


66

APPENDIX 3

Glossary (cont’d)

Consolidation methods

Line-by-line consolidation method

The accounts of the Consolidated Revenue Fund, which include the general fund and the special funds,

and the accounts of the other entities included in the Government’s reporting entity, with the exception of

government enterprises, are consolidated line by line in the financial statements. Accordingly, the

accounts are harmonized according to the Government’s accounting policies and combined line by line;

inter-entity transactions and balances are eliminated.

Modified equity method

Investment in government enterprises is accounted for using the modified equity method. According to

this method, investments are accounted for at cost. The cost is adjusted annually by the Government’s

share in the results of these enterprises with an offsetting entry to revenue, and by its share in the other

items of their comprehensive income with an offsetting entry to accumulated deficits. The value of the

investment is reduced by declared dividends and adjusted by the elimination of unrealized inter-entity

gains and losses relating to transactions on assets that remain within the Government’s reporting entity.

This method requires no harmonization of enterprises’ accounting policies with those of the Government.

Consolidated Revenue Fund

The Consolidated Revenue Fund consists of all money received or collected from various sources over

which the Parliament of Québec has the power of appropriation. The fund comprises a general fund and

special funds.

Debt representing accumulated deficits

The debt representing accumulated deficits consists of the accumulated deficits presented in the

Government's consolidated financial statements, plus the stabilization reserve balance established by the

Balanced Budget Act (CQLR, chapter E-12.00001).

Derivative instruments

Derivative instruments are instruments whose value fluctuates depending on an underlying instrument,

regardless of whether the underlying instrument is actually held or issued.

Financial assets

Financial assets are assets that can be used to repay existing debts or to finance future transactions. They

are not intended to be used to deliver public services.


67

APPENDIX 3

Glossary (cont’d)

Financial instruments

Financial instruments are liquid assets, equity securities in an entity or contracts that are both a source of

financial assets for one of the two contracting parties and a source of financial liabilities or equity

instruments for the other contracting party.

General fund

The general fund consists of money paid into the Consolidated Revenue Fund that has not been credited

to a special fund under legislative provisions.

Generations Fund

Under the Act to reduce the debt and establish the Generations Fund (CQLR, chapter R-2.2.0.1), the

Minister of Finance deposits the sums that make up this fund with the Caisse de dépôt et placement du

Québec. These sums are used exclusively for repaying the Government’s gross debt.

Government accounting policies

The Government’s accounting policies define how it must record financial transactions in its books and

adequately report them to the general public. They are adopted by the Conseil du trésor and derive from

the Canadian public sector accounting standards.

Gross debt

The gross debt corresponds to the sum of debts before deferred foreign exchange gains or losses and the

liability regarding the pension plans and other employee future benefits. The balance of the Generations

Fund is subtracted from this amount.

The gross debt for a fiscal year does not include borrowings contracted by the Minister of Finance for the

following fiscal year, or the portion of advances made to the Financing Fund established under the Act

respecting the Ministère des Finances (CQLR, chapter M-24.01) that is attributable to the funding of

bodies not contemplated by the first paragraph of section 89 of the Financial Administration Act

(CQLR, chapter A-6.001) and to the funding of the government enterprises listed in Schedule 3 of

this Act.

Gross domestic product (GDP)

GDP is the value of all goods and services produced within the geographical limits of a country or a

territory during a given calendar year.


68

APPENDIX 3

Glossary (cont’d)

Indicators

Indicators are tools of measurement that make it possible to monitor and assess the attainment of an

objective, the implementation of a strategy or the accomplishment of a task or an activity.

Missions

Missions are the basic activity areas of a government that constitute its raison d’être. In Québec, there are

six missions: “Health and Social Services”, “Education and Culture”, “Economy and Environment”,

“Support for Individuals and Families”, “Administration and Justice”, and “Debt Service”.

Net debt

The net debt corresponds to the difference between the Government’s financial assets and its liabilities. It

consists of accumulated deficits and non-financial assets.

Net financial requirements

Net financial requirements are net liquid assets required by the Government for operating, equity

investment and fixed asset investment activities.

Non-financial assets

Non-financial assets are assets used during the normal course of the Government’s activities to deliver

public services.

Own-source revenue

Own-source revenue consists of revenue from income and property taxes, consumption taxes, duties and

permits, miscellaneous sources, government enterprises and the Generations Fund.

Reporting entity

The Government’s reporting entity encompasses the financial transactions of the National Assembly,

persons appointed by it, government departments and all of the bodies, funds and enterprises under the

Government’s control. Control is defined as the power to direct the financial and administrative policies

of an entity such that its activities will provide the Government with anticipated benefits or expose it to

the risk of loss.


69

APPENDIX 3

Glossary (cont’d)

Retirement Plans Sinking Fund (RPSF)

Under the Financial Administration Act (CQLR, chapter A-6.001), the Minister of Finance may make

long-term investments by depositing money from the general fund of the Consolidated Revenue Fund

with the Caisse de dépôt et placement du Québec, up to an amount equal to the sums recorded as the

pension plans liability, in order to create a sinking fund to provide for the payment of all or part of the

benefits awarded under these plans.

Sinking Fund relating to Government Borrowings

Under the Financial Administration Act (CQLR, chapter A-6.001), the Minister of Finance may create a

sinking fund to provide for the repayment of any borrowing that is part of the Government’s public debt.

To that end, the Minister may, with the authorization of the Government, take out of the general fund of

the Consolidated Revenue Fund any sum the Minister pays into the sinking fund. In addition, prudential

liquid assets are kept in the sinking fund to enable the Government to fulfill its financial commitments in

the event of major disruptions in financial markets.

Special fund

A special fund is a fund established by an Act to provide for certain financial commitments of a minister,

a budget-funded body or a non-budget-funded body exercising an adjudicative function. Legislative

provisions determine which sums paid into the Consolidated Revenue Fund must be credited to a special

fund.

Supercategories

Supercategories consist of the categories used to account for expenditures. There are five expenditures

supercategories:

Transfer

This supercategory includes expenditures that are paid out to provide beneficiaries with various forms of

financial support. For the Government, these expenditures do not constitute direct acquisitions of goods

or services or funds granted for the purpose of obtaining a return, as in the case of an investment.


70

APPENDIX 3

Glossary (cont’d)

Remuneration

This supercategory includes expenditures incurred for ordinary remuneration, overtime and certain other

indemnities paid directly by the Government to permanent and part-time employees and to casual

employees, including students and seasonal public sector employees. It also includes the remuneration of

health professionals and benefits and other contributions paid by the Government in its capacity as an

employer, particularly, contributions to the pension plans, the Québec Pension Plan, the Québec Parental

Insurance Plan and employment insurance.

Operating

This supercategory includes expenditures incurred in the course of an entity’s administrative activities,

apart from remuneration expenses, transfer expenses, doubtful accounts and other allowances, and debt

service. In particular, it includes the estimated cost of reassessments and of the Government’s new

obligations regarding the remediation of contaminated land, as well as the depreciation of fixed assets.

Doubtful accounts and other allowances

This supercategory includes expenditures resulting from changes in the allowance for doubtful accounts,

the allowance for losses on financial initiatives guaranteed by the Government and the valuation

allowance for loans and portfolio investments.

Debt service

This supercategory includes interest on debts, minus the investment income of sinking funds for

borrowings, and interest charges in respect of the pension plans and other employee future benefits. It also

includes the amortization of premiums, discounts and costs related to the issue of borrowings and to debt

management, as well as the amortization of foreign exchange gains and losses.

consolidAtedfinAnciAl stAtements

S

ec

tio

n

2

C O N S O L ID A T ED F IN A N C IA L S T A T E M E NT S

2 0 1 3 - 2 0 14

73

Statement of responsibility

The Government is responsible for the integrity and objectivity of the consolidated financial statements.

These statements are prepared by the Comptroller of Finance for the Minister of Finance under the

Financial Administration Act (CQLR, chapter A-6.001, s. 86) and in accordance with the accounting

policies disclosed in Note 1. The analysis of the consolidated financial statements contained in Volume 1

is also prepared by the ministère des Finances.

To fulfil its accounting and financial reporting responsibilities, the Government maintains systems of

financial management and internal control designed to provide reasonable assurance that transactions are

duly authorized by Parliament and properly executed and recorded.

The Comptroller of Finance takes care of government accounting and obtains all the information needed

to meet its accounting requirements from government departments, bodies, enterprises and funds.

The Government submits its consolidated financial statements for audit assurance to the Auditor General

of Québec who, in his independent auditor’s report to the National Assembly, states the nature and scope

of his audit as well as his opinion.

The consolidated financial statements as part of the Public Accounts are tabled annually in the National

Assembly by the Minister of Finance.

On behalf of the Gouvernement du Québec,

Luc Monty Simon-Pierre Falardeau, CPA, CA

Deputy Minister of Finance Comptroller of Finance

Québec, October 16, 2014


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75

Independent Auditor’s Report

To the National Assembly,

Report on the Consolidated Financial Statements

I have audited the accompanying consolidated financial statements of the Government of Québec, which

comprise the consolidated statement of financial position as at March 31, 2014, the consolidated

statements of operations, accumulated deficit, change in net debt and cash flow for the year then ended,

and a summary of significant accounting policies and other explanatory information included in the notes

and the appendices.

Management’s Responsibility for the Consolidated Financial Statements

The Minister of Finance is responsible for the preparation and fair presentation of these consolidated

financial statements in accordance with Canadian public sector accounting standards and for such internal

control as the Minister of Finance determines is necessary to enable the preparation of consolidated

financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility

My responsibility is to express an opinion on these consolidated financial statements based on my audit. I

conducted my audit in accordance with Canadian generally accepted auditing standards. Those standards

require that I comply with ethical requirements and plan and perform the audit to obtain reasonable

assurance about whether the consolidated financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in

the consolidated financial statements. The procedures selected depend on the auditor’s judgment,

including the assessment of the risks of material misstatement of the consolidated financial statements,

whether due to fraud or error. In making those risk assessments, the auditor considers internal control

relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order

to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing

an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the

appropriateness of accounting policies used and the reasonableness of accounting estimates made by

management, as well as evaluating the overall presentation of the consolidated financial statements.

I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my

qualified audit opinion.


76

Basis for Qualified Opinion

The Government of Québec did not record, in the consolidated statement of financial position,

government transfers related to different assistance programs for the construction of tangible capital

assets and other expenditures that are financed or to be financed by loans for which the work has been

completed. These government transfers are currently reported as contractual obligations in Note 19 to the

consolidated financial statements. This situation constitutes a departure from the accounting standard for

government transfers (Canadian public sector accounting standards), which states that subsidies are

recognized when they are authorized by the government as a result of the exercise of its enabling

authority and when all eligibility criteria have been met by the recipients. This departure has also led me

to express a modified opinion for the audit of the consolidated financial statements of the previous year.

Furthermore, section 24.1 of the Financial Administration Act (CQLR, chapter A-6.001) states that the

only part of a multi-year transfer that must be recorded in the current fiscal year is the part that is both

payable and authorized by Parliament. Considering the current recording of these government transfers,

as stated in the Act, the following adjustments in accordance with the estimate established using available

information are necessary for the consolidated financial statements of the Government of Québec to

comply with Canadian public sector accounting standards:

Increase (Decrease)

In millions of dollars

2014 2013

Consolidated statement of financial position

Loans and portfolio investments (3,399) (3,150)

Other liabilities 5,123 4,933

Net debt and accumulated deficit 8,522 8,083

Consolidated statement of operations

Expenditure

Health and Social Services 53 15

Education and Culture 168 178

Economy and Environment 189 424

Support for Individuals and Families 20 18

Administration and Justice 9 (9)

Annual deficit 439 626

Note 19

Contractual obligations (8,522) (8,083)


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77

In addition to these adjustments, considering the absence of information enabling the identification of the

work completed at the end of the fiscal year for a remaining balance of $3,098 million as at

March 31, 2014 ($3,075 million as at March 31, 2013) in the category of contractual obligations “Grants

for repayment of the principal on borrowings to be contracted by recipients” in Note 19, I am unable to

determine the amount of the additional adjustments to be made to certain previously mentioned elements.

Qualified Opinion

In my opinion, except for the effects of the matter described in the Basis for Qualified Opinion, the

consolidated financial statements present fairly, in all material respects, the financial position of the

Government of Québec as at March 31, 2014, and the results of its operations, changes in its net debt and

its cash flows for the year then ended in accordance with Canadian public sector accounting standards.

Report on Other Legal and Regulatory Requirements

As required by the Auditor General Act (CQLR, chapter V-5.01), I report that, in my opinion, these

consolidated financial statements present fairly, in all material respects, the financial position of the

Government of Québec as at March 31, 2014, and the results of its operations and the changes in its

financial position for the year then ended in accordance with the accounting policies of the Government

of Québec set out in Note 1 to the consolidated financial statements and supplemented, in particular, by

section 24.1 of the Financial Administration Act (CQLR, chapter A-6.001).

In accordance with the requirements of the Auditor General Act (CQLR, chapter V-5.01), I report that, in

my opinion, these accounting policies have been applied on a basis consistent with that of the preceding

year.

Compliance with the Balanced Budget Act

Pursuant to section 7.3 of the Balanced Budget Act (CQLR, chapter E-12.00001), revenue and

expenditure for the government’s 2013-2014 fiscal year must be balanced. In addition, pursuant to

section 8, the overrun of $100 million in 2012-2013 relative to the budgetary objective that was set has

been added to the balanced budget objective for 2013-2014. As such, the annual deficit of $1,703 million

shown in the government’s consolidated financial statements as at March 31, 2014, exceeds the set

objective by $1,803 million, which contravenes the Balanced Budget Act.

In the Budget Plan tabled in June 2014, the government announced its intention to propose amendments

to the Balanced Budget Act to establish fiscal 2015-2016 for the return to a balanced budget and to set the

budgetary deficit objectives for 2013-2014 and 2014-2015. These new objectives would take into account

the overrun of $100 million relative to the budgetary deficit objective established for the 2012-2013 fiscal

year.


78

Comments of the Auditor General

The Auditor General Act (CQLR, chapter V-5.01) makes it possible to make any comments that I deem

appropriate in my report on the consolidated financial statements of the government. In addition, the

Canadian Auditing Standards provide that the auditor shall communicate to those charged with

governance his views about significant qualitative aspects of the entity’s accounting practices and, when

applicable, he shall explain why he considers that an important accounting practice that is acceptable

according to the applicable financial reporting framework, not to be the most appropriate to the particular

circumstances of the entity. It is in this context that I decided to make the following comments which

complete my opinion on these financial statements.

Recognition of Government Transfers (Subsidies)

The basis for my qualified opinion expressed above arises from my interpretation of the accounting

standard for government transfers, in light of the current conceptual framework as well as my in-depth

knowledge of the financial and budgetary practices of the Government of Québec.

Chapters 1 and 8 of the Report of the Auditor General of Québec to the National Assembly for 2011-2012

– Audit of Financial Information and Other Related Work as well as Chapter 2 of the report for

2012-2013 and for 2013-2014 describe in a detailed manner the reasons supporting my opinion. There, I

indicate specifically why the government’s accounting practice with regard to the recognition of

government transfers is not, in my opinion, the most appropriate. The government does not share my

interpretation.

Summarily, these chapters show that the government interprets that a transfer expenditure cannot be

recognized as long as the appropriations have not been voted by parliamentarians. While acknowledging

the authorities of the National Assembly, I note that government representatives are authorized to

negotiate and enter into valid contracts. Accordingly, government transfers are authorized when a

decision has been made by the government such that it no longer has any other realistic alternative than to

proceed with the transfer. I therefore consider that a subsidy expenditure must be recognized as soon as

the government has authorized it under its enabling authority and the recipients have incurred the eligible

expenditures that entitle them to the subsidy.


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79

Furthermore, in addition to the difference of opinion expressed above, other important differences with

respect to the interpretation of this standard have appeared within the profession. Representations have

been made, in particular by all auditors general of the provinces and of the federal government, including

the Auditor General of Québec, as well as by the Government of Québec to the Public Sector Accounting

Board (PSAB)—the organization responsible for standard-setting—in order to raise awareness about this

situation and to obtain more precise indications to ensure a consistent interpretation of the standard

throughout Canada. In June 2014, PSAB approved a project proposal on a post-implementation review of

the standard to assess the nature, extent and cause of issues raised by stakeholders and to identify the

challenges of implementation, effects of the standard and areas for improvement. In this respect, in

September 2014, it approved the publication of a post-implementation review document to gather relevant

information. PSAB will determine the next steps in light of this information. I will follow closely the

evolution of standard-setting, as well as the PSAB’s work on the accounting standard for government

transfers.

Michel Samson, CPA auditor, CA

Acting Auditor General of Québec

Québec, October 16, 2014


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81

Consolidated statement of operations

FISCAL YEAR ENDED MARCH 31, 2014 (in millions of dollars)

2013

Appendices Budget(1)

Actual

results

Actual

results

6 REVENUE

Income and property taxes (Note 4) 41 711 39 865 39 072

Consumption taxes 18 123 17 135 16 079

Duties and permits (Note 5) 2 215 2 198 2 084

Miscellaneous revenue 8 835 8 932 8 894

8 Revenue from government enterprises 5 108 5 430 3 232

Generations Fund revenue (Note 10) 1 039 1 121 961

Own-source revenue 77 031 74 681 70 322

Federal government transfers 18 161 18 550 17 517

Total revenue 95 192 93 231 87 839

7 EXPENDITURE

Health and Social Services 35 604 35 602 34 017

Education and Culture 19 607 20 620 19 540

Economy and Environment 11 778 11 859 11 289

Support for Individuals and Families 9 188 9 543 9 333

Administration and Justice 6 707 6 712 6 336

Sub-total 82 884 84 336 80 515

Debt service 10 869 10 598 9 839

Total expenditure 93 753 94 934 90 354

Contingency reserve (400) ― ―

ANNUAL SURPLUS (DEFICIT) 1 039 (1 703) (2 515)

2014

The notes to the financial statements and the appendices are an integral part of the consolidated financial statements.

(1) Based on the data presented in Budget 2013-2014 of the Ministère des Finances et de l’Économie tabled on November 20, 2012.


82

Consolidated statement of accumulated deficit


Appendix

2014 2013

(restated)

PREVIOUSLY ESTABLISHED ACCUMULATED

DEFICIT, BEGINNING OF YEAR (118 095) (115 220)

8 Restatements by government enterprises

with restatement of previous years (11) (11)

Restated accumulated deficit, beginning of year(118 106) (115 231)

8 Other comprehensive income items

of government enterprises (80) (360)

Annual surplus (deficit) (1 703) (2 515)

ACCUMULATED DEFICIT, END OF YEAR (119 889) (118 106)



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83

Consolidated statement of financial position

AS AT MARCH 31, 2014 (in millions of dollars)

Appendix

FINANCIAL ASSETS

Cash (Note 6) 1 363 1 664

Short-term investments (Note 7) 6 593 3 895

Accounts receivable (Note 8) 14 366 17 572

Inventories and other assets intended for sale 68 95

8 Investment in government enterprises 24 988 23 738

Loans and portfolio investments (Note 9) 8 980 9 215

Generations Fund (Note 10) 5 659 5 238

Deferred expenses related to debts 684 619

Total financial assets 62 701 62 036

LIABILITIES 0

Accounts payable and accrued expenses (Note 11) 22 413 21 693

Deferred revenue (Note 12) 5 731 7 123

Other liabilities (Note 13) 5 019 5 186

475 713

Pension plans and other employee

future benefits (Note 15) 28 672 28 492

Debts before deferred foreign exchange gains (losses)

(Notes 16 and 17) 181 032 0 173 576 0

Deferred foreign exchange gains (losses) 620 181 652 751 174 327

Total liabilities 243 962 237 534

NET DEBT (181 261) (175 498)

NON-FINANCIAL ASSETS 0

Fixed assets (Note 18) 60 662 56 685

Inventories 444 451

Prepaid expenses 266 256

Total non-financial assets 61 372 57 392

ACCUMULATED DEFICIT (119 889) (118 106)

Contractual obligations (Note 19)

Loan guarantees (Note 20)

Contingencies (Note 21)


to be repaid (Note 14)

2014 2013

(restated)



84

Consolidated statement of change in net debt


2013

(restated)

Appendix Budget(1)

Actual

results

Actual

results

PREVIOUSLY ESTABLISHED NET DEBT, BEGINNING

OF YEAR (177 215) (175 487) (167 700)

8 Restatements by government enterprises

with restatement of previous years (3 300) (11) (11)

Restated net debt, beginning of year (180 515) (175 498) (167 711)

Change due to fixed assets

Acquisition (Note 18) (8 778) (7 568) (8 302)

Depreciation (Note 18) 3 732 3 460 3 269

Disposals, reductions in value and other ― 131 170

Total change due to fixed assets (5 046) (3 977) (4 863)

Change due to inventories and prepaid expenses ― (3) (49)

8 Other comprehensive income items

of government enterprises ― (80) (360)

Annual surplus (deficit) 1 039 (1 703) (2 515)

Net increase in the net debt (4 007) (5 763) (7 787)

NET DEBT, END OF YEAR (184 522) (181 261) (175 498)

2014




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85

Consolidated statement of cash flow


OPERATING ACTIVITIES

Annual surplus (deficit) (1 703) (2 515)

Items not affecting liquid assets

Doubtful accounts 636 747

Allowances related to loans and portfolio

investments and loan guarantees 202 70

Inventories and prepaid expenses (3) (49)

(Gains) losses on the disposal of assets 42 27

Depreciation of fixed assets 3 460 3 269

Amortization of deferred expenses related to debts 127 88

Amortization of deferred contributions related

to the acquisition of fixed assets (242) (328)

Amortization of deferred foreign exchange (gains) losses (18) (9)

Amortization of discounts and premiums 10 4 214 34 3 849

2 511 1 334

Change in financial assets and liabilities

related to operations (Note 22) 1 614 (979)

4 125 355Activities related to pension plans

and other employee future benefits

Cost of accrued benefits 2 401 2 164

Changes to plans 0 (79)

Amortization of actuarial (gains) losses 806 705

Interest on obligations relating to

accrued benefits 5 608 8 815 5 285 8 075

Benefits paid and plan-to-plan transfers (5 463) (5 165)

3 352 2 910

Liquid assets provided by

operating activities 7 477 3 265

INVESTING ACTIVITIES IN INVESTMENT

Change in investment in government

enterprises

Investments made (165) (80)

Results of enterprises entered

as revenue less declared dividends (1 165) (1 330) (363) (443)

Change in loans and portfolio investments

Loans and portfolio investments made (1 591) (1 637)

Loans and portfolio investments disposed of and other 1 572 (19) 1 305 (332)

Liquid assets used for investing

activities in investment (1 349) (775)

2014 2013


86

Consolidated statement of cash flow (cont'd)


FIXED ASSET INVESTMENT

ACTIVITIES(1)

Acquisitions (6 621) (6 751)

Disposals 84 (6 537) 143 (6 608)

Liquid assets used for fixed

asset investment activities (6 537) (6 608)

FINANCING ACTIVITIES(1)

Change in debts

Borrowings made 23 068 22 084

Borrowings repaid (16 729) 6 339 (14 611) 7 473

Activities related to pension plans

and other employee future benefits

Change in the Retirement Plans Sinking Fund

and specific pension funds

Payments and benefits (943) (1 093)

Reinvestment of funds' investment

income (2 229) (3 172) (2 201) (3 294)

Activities related to the Generations Fund

Change in the Generations Fund (421) (961)

Liquid assets provided by

financing activities 2 746 3 218

Increase (decrease) in liquid assets 2 337 (900)

LIQUID ASSETS, BEGINNING OF YEAR 6 396 7 296

LIQUID ASSETS, END OF YEAR(2)

8 733 6 396

2014 2013


(1) Transactions that do not affect liquid assets must not be included in the consolidated statement of cash flow. They are itemized in Note 22, “Cash flow information”.

(2) Liquid assets include cash in bank (Note 6) and short-term investments (Note 7).

C O N S O L ID A T ED F IN A N C I A L S T A T E M E NT S

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Notes to the consolidated financial statements

1. Significant accounting policies

The Gouvernement du Québec accounts for its financial transactions in accordance with the accounting

policies adopted by the Conseil du trésor and described below. The primary source of reference for

establishing these policies are the Canadian public sector accounting standards. When necessary, the

information presented in these consolidated financial statements is based on the best estimates and

judgment by the Government.

Reporting entity

The Government’s reporting entity encompasses the financial transactions of the National Assembly and

persons appointed by the National Assembly, departments and all the bodies, funds and enterprises under

the control of the Government. Control is defined as the power to direct the financial and administrative

policies of an entity such that its activities will provide the Government with anticipated benefits or

expose it to the risk of loss. The entities included in the Government’s reporting entity are listed in

appendices 1 to 4 of these consolidated financial statements.

Fiduciary transactions carried out by the entities mentioned in Appendix 5 of the consolidated financial

statements are not included in the Government’s reporting entity.

Consolidation method

The accounts of the Consolidated Revenue Fund, which includes the general fund and the special funds,

and the accounts of the other entities included in the Government’s reporting entity, with the exception of

government enterprises, are consolidated line by line in the financial statements. Accordingly, the

accounts are harmonized according to the Government’s accounting policies and combined line by line;

inter-entity transactions and balances are eliminated.

Investment in government enterprises is accounted for using the modified equity method. According to

this method, investments are accounted for at cost. The cost is adjusted annually by the Government’s

share in the results of these enterprises with an offsetting entry to revenue, and by its share in the other

items of their comprehensive income with an offsetting entry to accumulated deficits. The value of the

investment is reduced by declared dividends and adjusted by the elimination of unrealized inter-entity

gains and losses relating to transactions on assets that remain within the Government’s reporting entity.

This method requires no harmonization of enterprises’ accounting policies with those of the Government.


88

1. Significant accounting policies (cont’d)

A government enterprise has all of the following characteristics:

it is a separate legal entity that has the authority to enter into contracts in its own name and to go

before a court;

it is vested with the financial and administrative power to carry out commercial activities;

its main activity is the sale of goods or the delivery of services to individuals or to organizations not

included in the Government’s reporting entity;

it may, during the normal course of its operations, pursue its activities and settle its debts using

revenue from sources not included in the Government’s reporting entity.

Revenue

Revenue is recorded using the accrual method, i.e. in the fiscal year during which the transactions or the

events giving rise to the revenue occurred. Revenue that would be too difficult to measure prior to

reception is recorded at the time the funds are received. Sums received or receivable in regard to revenue

that will be earned in a subsequent year are deferred and presented as deferred revenue.

More specifically:

Tax revenue (income and property taxes, consumption taxes)

Tax revenue arises from transactions with no consideration in goods or services, for which taxpayers are

required, under the tax legislation, to pay money to the Government in order to fund public services. Such

revenue is recognized once the tax measures giving rise to it have been authorized by Parliament and a

taxable event has occurred.

Personal income tax revenue and health services contributions are recognized when the taxpayer earned

the income subject to tax. Revenue not collected at the end of the fiscal year and refunds not yet issued

are recorded on the basis of estimates established according to transactions that will take place in the three

months following the end of the fiscal year.

Revenue from school property taxes is recognized over the reference period for such taxes.


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Corporate income tax revenue is recorded at the time the funds are received, because amounts receivable

or refundable cannot be accurately estimated. Taxable corporate income varies significantly from year to

year and the time allowed for filing corporate returns does not allow complete information to be obtained

in time to make the necessary adjustments to revenue on the closing date of the Government’s financial

statements. An adjustment is made to account for notices of assessment issued before the end of the fiscal

year.

Revenue from consumption taxes is recognized at the time of the sale of the products or the delivery of

the services, after deducting tax credits.

Tax revenue does not take into account estimates concerning taxes due on unreported revenue within the

time prescribed. These amounts are recorded when assessments are issued following tax recovery work or

the filing of returns by taxpayers.

In accordance with the tax legislation, refundable tax credits reduce related tax revenue. For the purposes

of the Government’s consolidated financial statements, refundable tax credits that constitute transfers

made through the tax system are reclassified and presented in expenditure, thus increasing revenue. A

refundable tax credit constitutes a transfer when it provides a taxpayer with a financial benefit for a

purpose other than that of reducing the taxes that the taxpayer would otherwise have been required to pay

to the Government.

Duties and permits

Revenue from duties and permits arises from transactions with consideration for which the Government

grants a third party, in exchange for liquid assets, a right of use or an operating permit or issues a third

party a certificate.

Revenue from duties and permits is recognized when receivable. Where duty or permit revenue is

refundable on demand and is linked to clearly identifiable goods and services that the Government must

supply to the holder of the duty or the permit, the revenue is recognized over the reference period of such

duty or permit.

Miscellaneous revenue

Revenue from the sale of goods or services and from user contributions is recognized when the goods are

sold or the services are delivered.


90


Revenue from tuition fees is recognized over the duration of the training concerned.

Interest income is recognized as it is earned. It ceases to be recorded when the recovery of interest or

principal is not certain.

Donation revenue, other than transfer revenue from governments, that is not designated by the donor for a

specific purpose is recognized in revenue in the year of its donation. When such revenue is designated for

a specific purpose, it is recognized in revenue according to the conditions of its designation. In the case of

donations of fixed assets or donations of cash for the acquisition of fixed assets, the revenue is recognized

at the same rate as the depreciation of the fixed assets. In the case of donations related to land, the revenue

is recognized in the year of acquisition.

Federal government transfer revenue

Federal government transfer revenue is recognized in revenue for the fiscal year in which it is authorized

by the federal government and in which the eligibility criteria are met, except if the stipulations imposed

by that Government regarding the use of the sums received or the actions to be taken in order to keep

them create an obligation that meets the definition of a liability. When the stipulations are general, the

Government’s actions and/or communications, carried out at the date of the financial statements to clarify

them may also create a liability. Once a liability is recognized, the transfer revenue is recorded in revenue

as the obligations related to these stipulations are met.

When the Government receives transfer revenue from other governments, the revenue is accounted for in

the same way as federal government transfer revenue.

Expenditure

Expenditure is recorded using the accrual method, i.e. in the fiscal year during which the transactions or

the events giving rise to the expenditure occurred.

Remuneration and operating expenses

Remuneration and operating expenses are recorded in the fiscal year during which the goods are

consumed or the services are delivered. Operating expenses include in particular the annual depreciation

of the cost of fixed assets.


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Transfer expenditures

Transfers are economic benefits granted by a government to a recipient, for no consideration in goods or

services. A multi-year transfer is a transfer that is spread over more than one fiscal year.

Transfer expenditures are recognized during the fiscal year in which they are duly authorized, in

accordance with the governance rules of the entity that grants them, and in which the recipients satisfied

the eligibility criteria.

Under the statutes in force, a transfer is authorized when Parliament and the Government have each

exercised their power of authorization.

The authorization of Parliament is granted in the case of a department or a budget-funded body

during the voting of an appropriations act or the application of any other act authorizing the granting

of appropriations. In the case of special funds, such authorization is granted during the approval of

expenditure and investment forecasts by Parliament for a given fiscal year. In the case of other

entities, this power of authorization is granted to their boards of directors by Parliament when their

constituting acts are adopted.

The Government’s power of authorization is exercised by the adoption of orders in council or

decisions of the Conseil du trésor or by the conclusion of an agreement with the transfer recipient.

Therefore, the Government retains its discretionary power in that it is not required to make transfers until

Parliament and the Government have both exercised their power of authorization. The only part of a

multi-year transfer that may be recorded in the accounts for a given fiscal year is the part that is both

payable and authorized by Parliament for that year.

Debt service

Debt service includes interest on debts, reduced by the investment income of sinking funds for

borrowings, and interest charges in respect of the pension plans and other employee future benefits. It also

includes the amortization of premiums, discounts and costs related to the issue of borrowings and debt

management, as well as the amortization of foreign exchange gains and losses. Interest charges resulting

from transactions in foreign currency are translated into Canadian dollars at the rates in effect at the time

of the transactions.


92


Financial assets

Financial assets are asset items that may be used to repay existing debts or to fund future transactions;

they are not intended to be used to deliver public services.

Short-term investments

Short-term investments are recorded at the lesser of cost and fair value.

Accounts receivable

Accounts receivable are initially recorded at cost and then brought down to their net recoverable value by

means of an allowance for doubtful accounts. The annual change in this allowance is charged to

expenditure.

Inventories and other assets intended for sale

Inventories and other assets intended for sale are evaluated at the lesser of cost and net realizable value.

Investment in government enterprises

Investment in government enterprises is recorded using the modified equity method.

Loans and portfolio investments

Loans and portfolio investments are recorded at cost.

If loans and portfolio investments have significant concessionary terms, that is, there is a difference of

over 25% between their face value and their present value at the average rate of government borrowings,

the loans and investments are recorded at their present value when they take effect. The difference with

their face value constitutes a “grant” component, which is recognized as a transfer expense. The interest

income is then recognized over the lifetime of the loans and portfolio investments using the effective

interest method.


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An allowance is recorded as a reduction in loans when the facts or circumstances point to a future loss. In

the case of portfolio investments, an allowance is recorded when a durable loss in value is recognized.

The annual change in these allowances is charged to expenditure. The write-off of any loan or portfolio

investment reduces the cost as well as the allowance related to it; the remaining balance is charged to

expenditure. The subsequent recovery is recorded as a reduction in expenditure.

Generations Fund

Demand and participation deposits in a particular fund of the Caisse de dépôt et placement du Québec are

recorded at cost.

At the time of disposition of participation deposits, the difference between the amount received and the

book value of these units established using the average cost method is charged to results. Where

participation deposits suffer a durable loss in value, their book value is reduced to reflect this decline and

the resulting reduction in value is charged to results.

The revenue and expenditure of the Generations Fund are recorded according to the Government’s

accounting policies.

Liabilities

Liabilities are obligations of the Government toward third parties on the financial statement date arising

from past transactions or events, and whose fulfilment will give rise to an outflow of resources

representative of economic benefits in the future.

Allowance for losses on guaranteed financial initiatives

Obligations resulting from financial initiatives guaranteed by the Government, mainly loan guarantees are

recorded on the basis of probable losses. The allowance is established on the balance of the guaranteed

financial initiatives reduced by the estimated realizable value of the security and surety obtained. The

annual change in the allowance is charged to expenditure.

Probable losses are estimated by grouping financial initiatives into various risk classes and applying an

average loss rate to each class, based on past experience and the nature of the initiatives. In the case of

enterprises whose Government-guaranteed financial initiatives show an exceptionally high cumulative

balance or are characterized by specific features, the estimate of probable losses relating to these

initiatives is made using case-by-case analysis, regardless of risk class. Probable losses are revised

annually.


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Environmental liability

The obligations resulting from the remediation of contaminated land under the Government’s

responsibility, or probably under its responsibility, are recorded as environmental liabilities as soon as the

contamination occurs or as soon as the Government is informed of the contamination and a reasonable

estimate can be made. An environmental liability includes the estimated cost of contaminated land

management and remediation. The cost evaluation is based on the best information available and is

revised annually.

Pension plans and other employee future benefits

Obligations relating to the pension plans and other employee future benefits

Obligations relating to defined-benefit pension plans and employee future benefit programs are evaluated

using the projected benefit method prorated on years of service and the most probable assumptions set by

the Government.

The method used takes into account the way in which benefits payable by the Government are accrued by

participants.

In the case of the Survivor’s Pension Plan, the value of obligations is established using an actuarial

method that determines the present value of the pensions accrued by beneficiaries as a result of the

eligible person’s death.

Retirement Plans Sinking Fund and specific pension funds

The investments of the Retirement Plans Sinking Fund (RPSF) and specific pension funds and employee

future benefit programs funds are valued at an adjusted market value. With this valuation method, the

difference between the real return based on market value and the forecast return is amortized over

five years.

When the adjusted market value of a pension plan fund is higher than that of its obligations, the resulting

surplus is capped through a valuation allowance so that the pension plans liability reflects only the future

benefit that the Government expects to derive from this surplus.


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Accrued benefits expense

The accrued benefits expense consists of the portion of the cost of benefits accrued during the year that is

payable by the Government, the Government’s share of the cost of pension plan changes concerning

previous years of service and the amortization of actuarial gains and losses in respect of the Government’s

obligations relating to accrued benefits.

Actuarial gains and losses determined during the revaluation of obligations stem from experience

adjustments to forecast results and from changes to assumptions. They are recognized in expenditure

using the straight-line method, as of the fiscal year following the year in which the actuarial gains and

losses are taken into account in the financial statements. The amortization period corresponds to the

expected average remaining service life (EARSL) of plan or program participants. The Government and

Public Employees Retirement Plan (RREGOP), the Civil Service Superannuation Plan (CSSP), the

Teachers Pension Plan (TPP) and the Pension Plan of Certain Teachers (PPCT) all have the same

EARSL. In the case of the Survivor’s Pension Plan, the amortization period corresponds to the average

remaining life expectancy of beneficiaries.

Interest charges

Interest charges correspond to the net difference between interest on obligations relating to accrued

benefits and the anticipated investment income of the RPSF and specific pension funds and employee

future benefit program funds, adjusted by the amortization of the actuarial gains and losses relating to

these funds and by the change in valuation allowances.

Annual interest is determined by applying, to the average value of the obligation relating to the accrued

benefits of each plan or program, the discount rate related to that obligation. As for the annual return of a

fund, it is obtained by applying, to the average balance of the fund, the rate of return stipulated in the

actuarial valuations of the obligations of the related pension plans or the obligations of the employee

future benefit program concerned.

Actuarial gains and losses attributable to the use of the forecast rate of return are amortized using the

straight-line method. In the case of the RPSF, the amortization period corresponds to the EARSL of

pension plan participants. In the case of the other funds, it corresponds to the period set for amortizing the

actuarial gains and losses related to the obligations of the pension plan or program concerned.


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Debts

Debts

Borrowings are recorded at the amount received at the time of issue, adjusted by the premium or discount

amortization to obtain the amount of principal repayable at maturity. The amortization is calculated using

the effective rate for each borrowing.

Issue expenses related to borrowings are deferred and amortized over the term of each borrowing using

the straight-line method. The unamortized balance is included in deferred expenses related to debts.

Borrowings in foreign currency are translated into Canadian dollars at the rates in effect on March 31 of

the current year.

Foreign exchange gains or losses resulting from the translation of borrowings are deferred and amortized

over the remaining term of each borrowing using the straight-line method.

Derivative instruments

The Government uses derivative instruments to manage foreign exchange and interest rate risks related to

debts. These instruments are recorded at cost.

Derivative instruments used to manage the foreign exchange risk associated with the repayment of

interest and principal on borrowings and with the cash management transactions such risk management

entails, including currency swap contracts and foreign exchange forward contracts, are translated into

Canadian dollars at the rates in effect on March 31 of the current year. The components of these

instruments, namely, financial assets and liabilities, are offset against one another and presented in

“Debts”.

Interest rate exchanges stemming from interest rate swap contracts used to change exposure to interest

rate risk over the long term are reconciled with interest charges for the borrowings with which these swap

contracts are associated.

Gains or losses on derivative instruments are deferred and amortized over the term of each contract.

However, gains or losses on derivative instruments used to modify the interest rate risk are amortized

over the term of the security underlying these instruments.


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Sinking Funds

Securities held by the sinking funds are recorded at the amount paid at the time of purchase, adjusted by

the premium or discount amortization to obtain the amount of principal receivable at maturity. The

amortization is calculated on the basis of the effective rate for each security.

The difference between the book value of a security and the amount received at the time of its disposal is

charged to results.

Non-financial assets

Non-financial assets are assets used during the normal course of the Government’s activities to provide

public services.

Land in the public domain and natural resources, such as forests, water and mining resources, which the

Government holds by virtue of the fact that they were devolved to the state and not purchased, are not

recorded in the Government’s consolidated financial statements. Intangible items do not constitute non-

financial assets for the Government.

Fixed assets

Fixed assets consist of acquired, built, developed or improved non-financial assets, whose useful life

extends beyond the fiscal year and which are intended to be used on an ongoing basis for producing goods

or delivering services.

Fixed assets are recorded at cost and depreciated – except for land, which is not depreciated – using a

logical and systematic method over a period corresponding to their useful life. Their cost includes

financing charges capitalized during their construction, improvement or development.

The cost of fixed assets held under capital leases is equal to the present value of minimum payments due.

Fixed assets under construction or being developed or improved are not depreciated.


98


Some fixed assets are acquired under private-public partnership agreements. These agreements are long-

term contracts by which the Government involves one or more private partners in designing, realizing and

operating a public good, with or without funding from these partners. The fixed asset and the

corresponding debt associated with it are accounted for in the “statement of financial position” when the

risks and advantages associated with the ownership of the public good are devolved to the Government,

for the most part, in accordance with the terms of the agreement.

The cost of a fixed asset acquired under a private-public partnership agreement is equal to the lower of the

present value of the cash flows associated with the fixed asset and the fixed asset's fair value. If the cash

flows associated with the fixed asset cannot be isolated from those related to its operation, the cost of the

asset is determined on the basis of its fair value. The fair value of the fixed asset is estimated on the basis

of the agreement's specifications.

Works of art and historic properties, such as paintings, sculptures, drawings, prints, photographs, films

and videos are not recorded as fixed assets. Their cost is charged to expenditure for the fiscal year during

which they are acquired.

Fixed assets acquired through government transfer or through donation, including those acquired for a

nominal value, are recorded at their fair value at the time of acquisition.

Inventories

Inventories consist of supplies that are consumed in the normal course of operations during the coming

fiscal year(s). These inventories are valued at the lower of cost and net realizable value.

Prepaid expenses

Prepaid expenses represent outlays made before the end of the fiscal year for services the Government

will receive during the coming fiscal years. These expenses are charged to expenditure when the

Government receives the services acquired.


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2. Measurement uncertainty

In preparing the consolidated financial statements, the Government has to make estimates and

assumptions in order to evaluate and record certain asset, liability, revenue and expenditure items. These

estimates are based on the most reliable data and the most probable assumptions available at the time, and

involve judgment by the Government. They are revised annually to reflect new information as it becomes

available.

By their very nature, estimates are subject to measurement uncertainty. Therefore, actual results may

differ from the Government's forecasts.

Estimates are made for certain material consolidated financial statement items.

Amounts receivable or repayable in regard to federal government transfers may vary because of

possible differences between the assumptions made for fiscal and population data and the actual data.

Obligations relating to pension plans and other employee future benefits may vary because of

differences between the economic and demographic assumptions made for actuarial valuation

purposes and the actual results.

Environmental liabilities related to contaminated land may vary because of differences between

estimated management and remediation costs and actual costs.

The value of certain allowances may vary because of differences between the assumptions made to

evaluate the probability of collection and the amount actually collected.


100

3. Accounting changes

The Government did not make any accounting changes in fiscal 2013-2014. However, certain government

enterprises made changes to their accounting policies; these changes are presented in Appendix 8,

“Investment in government enterprises”, under the heading “Restatements by government enterprises”.


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4. Tax-funded transfers

In accordance with the tax legislation, refundable tax credits reduce related tax revenue. For the purposes

of the Government’s consolidated financial statements, refundable tax credits that constitute transfers

made through the tax system are reclassified and presented in expenditure, thus increasing revenue

derived from income and property taxes. A refundable tax credit constitutes a transfer when it provides a

taxpayer with a financial benefit for a purpose other than that of reducing the taxes that the taxpayer

would otherwise have been required to pay to the Government.

Tax-funded transfers (in millions of dollars)

2013

Health and

Social

Services

Education

and Culture

Economy and

Environment

Support for

Individuals

and Families

Administration

and Justice

Consolidated

total

Consolidated

total

INCOME - INCOME AND PROPERTY TAXES

Personal income tax

Refundable tax credits

Child assistance 2 206 2 206 2 173

Day care expenses 593 593 528

Home-support services for seniors 356 356 326

Caregivers 54 54 54

Education savings 64 64 55

Work premium 356 356 354

Medical expenses 53 53 50

Other 7 12 27 2 48 24

470 76 27 3 155 2 3 730 3 564

Corporate tax

Refundable tax credits

Scientific research and experimental development 644 644 596

Job creation in a designated region 47 47 67

Construction of public access roads and bridges 110 110 129

Film production 231 231 154

Resources 141 141 39

Reporting of tips 77 77 65

Investment 133 133 122

Multimedia titles 153 153 103

E-business 270 270 287

Other 83 125 208 191

― 314 1 623 ― 77 2 014 1 753

470 390 1 650 3 155 79 5 744 5 317

2014

EXPENDITURE BY GOVERNMENT MISSION

The solidarity tax credit, worth $1 784 million as at March 31, 2014 ($1 703 million as at

March 31, 2013), constitutes an abatement since it is designed to refund certain taxes to low-income

households. Therefore, this refundable tax credit is presented as a reduction of consumption taxes

revenue.


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5. Duties and permits

Revenue from duties and permits is recorded after deducting the following amounts.

Amounts deducted from revenue from duties and permits (in millions of dollars)

2014 2013

Gross revenue 2 224 2 217

Deductions

Silvicultural work and other forest

management activities 0 121

Other 26 12

26 133

Net revenue 2 198 2 084


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6. Cash

(in millions of dollars)

2014 2013

Cash in bank 2 140 2 501

Plus

Cash and notes on hand and

outstanding deposits 299 402

2 439 2 903

Less

Outstanding cheques (1 076) (1 239)

1 363 1 664


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7. Short-term investments


2014 2013

Treasury bills 122 107

Notes 1 026 223

Deposit certificates 604 260

Term deposits 177 272

Banker's acceptances 2 064 1 151

Bonds 2 527 1 845

Other 73 37

6 593(1),(2)

3 895(1),(2)

(1) The weighted average interest rate for short-term investments was 1.06% (1.15% as at March 31, 2013). This rate corresponds to the effective rate for short-term investments held as at March 31, 2014. Short-term investments are highly liquid investments that the Government does not intend to keep for more than one year. These investments will mature in the coming fiscal year, except for certain transitional securities totalling $78 M, whose maturity dates range mostly from April 2015 and October 2018.

(2) As at March 31, 2014 and 2013, the quoted market value of marketable securities on official markets was similar to the book value of these securities.


2 0 1 3 - 2 0 14

105

8. Accounts receivable


2014 2013

Agents and assignees

Income and property taxes 868 960

Consumption taxes 2 693 3 233

3 561 4 193

Accounts receivable

Income and property taxes 4 335 5 137

Consumption taxes 909 1 000

Duties and permits 451 472

Miscellaneous revenue 2 058 2 196

436 502

8 189 9 307

Allowance for doubtful accounts (1 936) (2 099)

6 253 7 208

Estimated accounts receivable - accrual basis 2 756 2 675


enterprises – dividends 111 274

Federal government transfers 1 618 3 155

Accrued interest on loans and portfolio investments 67 67

14 366 17 572

Recoveries of expenditures and other


106

9. Loans and portfolio investments


2014 2013

Loans 7 237 7 235

Portfolio investments 1 743 1 980

8 980 9 215

Loans by category (in millions of dollars)

Loans (1)Valuation

allowances Total Loans

Valuation

allowances Total

Other governments

Municipalities 1 079 1 079 1 161 1 161

Municipal bodies 1 219(2)

1 219 972(2)

972

2 298 ─ 2 298 2 133 ─ 2 133

Enterprises, organizations, 0 individuals and other

University establishments not

included in the Government's

reporting entity 2 747 0 2 747 2 645 0 2 645

Enterprises 1 962(2)

(970) 992(3),(4)

1 929(2)

(811) 1 118(3),(4)

Non-profit and fiduciary

organizations 784 (60) 724 897 (60) 837

Students 675 (294) 381 692 (297) 395

Other 104(2)

(9) 95 107(2)

0 107

6 272 (1 333) 4 939 6 270 (1 168) 5 102

8 570 (1 333) 7 237 8 403 (1 168) 7 235

20132014

(1) The loans granted to municipalities and municipal bodies bear interest at a weighted average rate of 3.83%. Those granted to university establishments not included in the Government’s reporting entity bear interest at a weighted average rate of 2.88%. Those granted to enterprises bear interest at a weighted average rate of 3.05%. Those granted to fiduciary and non-profit organizations bear interest at a weighted average rate of 1.55%. The majority of loans to students bear interest at a rate of 3.50%.

(2) The guarantees received for the loans amounted to $450 M ($423 M as at March 31, 2013).

(3) Certain loans had special repayment clauses based on royalties, for a total of $273 M ($350 M as at March 31, 2013).

(4) The grant portion related to loans with significant concessionary terms reduced the value of these loans by $136 M ($140 M as at March 31, 2013).


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107

9. Loans and portfolio investments (cont’d)

Schedule of loan payments receivable (in millions of dollars)

Maturing on

March 31

Municipalities

and municipal

bodies

University

establishments

not included in the

Government's

reporting entity Enterprises

Non-profit and

fiduciary

organizations Students Other Total

2015 163 379 171 398 48 39 1 198

2016 165 419 105 182 48 1 920

2017 167 462 188 28 48 0 893

2018 171 488 88 25 48 0 820

2019 175 250 67 31 48 1 572

841 1 998 619 664 240 41 4 403

2020-2024 859 670 240 60 141 2 1 972

2025-2029 352 37 104 0 0 1 494

2030-2034 153 36 16 0 0 0 205

2035-2039 0 6 148 0 0 0 154

2040 and thereafter 0 0 0 0 0 0 ―

2 205 2 747 1 127 724 381 44 7 228

No fixed maturity date 93 0 1 0 0 51 145

2 298 2 747 1 128 724 381 95 7 373

Grant portion related to

loans with significant

concessionary terms 0 0 (136) 0 0 0 (136)

2 298 2 747 992 724 381 95 7 237


108

9. Loans and portfolio investments (cont’d)

Portfolio investments by category (in millions of dollars)

2013

Shares and

capital

investments(1)

Asset-backed

term notes

(ABTNs)

(Note 23)

Participation

deposits

Bonds and

notes Total Total

Other governments

Federal and provincial

governments 0 0 0 63 63 48

Municipalities and municipal

bodies 0 0 0 66 66 78

― ― ― 129 129 126

Enterprises, organizations, and other

Enterprises 355(2)

0 0 112 467 422(2)

Non-profit and fiduciary

organizations 0 0 837(3)

0 837 1 075

Other 31 218 0 163 412 455

386 218 837 275 1 716 1 952

Valuation allowances (108) (32) 0 (10) (150) (153)

278 186 837 265 1 566 1 799

Sinking fund

for borrowings by university

establishments not included

in the Government's

reporting entity 0 0 0 48(4)

48 55

278 186 837 442 1 743 1 980

2014

(1) As at March 31, 2014 and 2013, the quoted market value of marketable securities on official markets were similar to the book value of these securities.

(2) The grant portion related to portfolio investments with significant concessionary terms reduced the value of these investments by $186 M ($184 M as at March 31, 2013).

(3) The Government holds participation units in specific funds entrusted to the Caisse de dépôt et placement du Québec.

(4) Under the University Investments Act (CQLR, chapter I-17), the Government created a sinking fund in which the amounts deposited by the responsible minister are allocated exclusively to the repayment of borrowings (principal and interest) for the funding of fixed assets of university establishments not included in the Government’s reporting entity.


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109

10. Generations Fund

The purpose of the Generations Fund, created under the Act to reduce the debt and establish the

Generations Fund,1 is to reduce the Government’s debt. In accordance with this Act, the fund’s assets are

used exclusively to repay the Government’s debt.

Revenue for the fiscal year ended March 31, 2014 (in millions of dollars)

2013

Budget

Actual

results

Actual

results

Revenue

Water-power royalties 746 763 717

Unclaimed property 12 19 12

Investment income 281 339 232

Total revenue 1 039 1 121 961

2014

1 CQLR, chapter R-2.2.0.1


110

10. Generations Fund (cont’d)

Change in the balance of the Generations Fund for the fiscal year ended March 31, 2014 (in millions of dollars)

2014 2013


Plus

Deposits from the Territorial Information Fund 300

Revenue 1 121 961

6 659 5 238

Less

Sums used to repay debts 1 000


_____________________________________________________________

Financial position as at March 31, 2014 (in millions of dollars)

2014 2013

Amounts managed by the Caisse de dépôt et placement du Québec

Demand deposits 61 88

Investment income receivable 37 29

Participation deposits(1)

5 487 5 035

5 585 5 152

Accounts receivable 74 86

Fund balance 5 659 5 238

(1) The Generations Fund acquired participation units in a specific fund at the Caisse de dépôt et placement du Québec. These units are repaid with prior notice according to the Caisse’s settlement terms and conditions at the market value of the fund’s net equity at the end of each month. The Generations Fund had 5 844 937 participation units with a total fair value of $6 200 M (5 409 313 participation units with a total fair value of $5 433 M as at March 31, 2013).


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111

11. Accounts payable and accrued expenses


2014 2013

Remuneration 6 308 6 080

Income and taxes refundable

Income and property taxes 3 729 3 867

Consumption taxes 1 845 2 057

Suppliers 3 948 3 818

Advances from trust funds 123 132

Clearing accounts for collected taxes 496 264

Accrued interest on borrowings 2 668 2 780

Transfers 3 296 2 695

22 413 21 693


112

12. Deferred revenue


2014 2013

School property tax 463 397

Registration and drivers licence fees 702 660

Federal government transfers(1),(2)

2 600 4 106

Third-party donations(1),(3)

1 458 1 468

Guarantee fees for Hydro-Québec borrowings 154 150

Other 354 342

5 731 7 123

(1) This deferred revenue arises from stipulations made by the federal government or from externally imposed restrictions requiring that the assets received be used for specific purposes.

(2) This item includes federal government transfer revenue of $40 M ($53 M as at March 31, 2013) accounted for in specified purpose accounts, i.e. $16 M ($26 M as at March 31, 2013) allocated to the acquisition of fixed assets and $24 M ($27 M as at March 31, 2013) allocated to other purposes.

(3) These donations are mainly from non-profit organizations, including foundations that provide financial support to public institutions in the health and social services network.

This item includes third-party donations revenue of $42 M ($33 M as at March 31, 2013) accounted for in specified purpose accounts allocated to other purposes than fixed asset acquisitions.


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113

12. Deferred revenue (cont’d)

Breakdown of deferred revenue (in millions of dollars)

2013

Opening

balance

New trans-

fers and

donations

Recognition

in revenue

Closing

balance

Closing

balance


Allocated to the acquisition of fixed assets 2 098 196 176 2 118 2 098

Allocated to other purposes

Harmonisation of the QST with the GST 1 467 0 1 467 ─ 1 467

Municipal and local infrastructures 391 453 497 347 391

Société d'habitation du Québec, Québec

AccèsLogis and Affordable Housing programs 9 1 10 ─ 9

Maintenance of dams transferred by the

federal government12 0 1 11 12

Base funding - Building Canada plan 14 0 14 ─ 14

Other 115 814 805 124 115

2 008 1 268 2 794 482 2 008

4 106 1 464 2 970 2 600 4 106

Third-party donations

Allocated to the acquisition of fixed assets 881 123 96 908 881

Allocated to other purposes 587 525 562 550 587

1 468 648 658 1 458 1 468

2014


114

13. Other liabilities


2014 2013

Allowance for losses on guaranteed

financial initiatives (Note 20) 666 696

Environmental liability (Note 21) 3 175 3 173

Obligations in respect of the sinking fund relating

to borrowings by university establishments not

included in the Government's reporting entity(1)

48 55

Obligations stemming from transfer agreements for the

repayment of the principal on borrowings contracted

or to be contracted by recipients(2)

1 130 1 262

5 019 5 186

(1) A sinking fund of $48 M ($55 M as at March 31, 2013) for borrowings by university establishments not included in the Government’s reporting entity has been earmarked to pay for these obligations. Information in this regard is given in Note 9, “Loans and portfolio investments”.

(2) Obligations under transfer agreements for the payment of the principal on borrowings contracted or to be contracted by recipients stem from transfer programs administered by non-budget-funded bodies, primarily the Société de financement des infrastructures locales du Québec and the Société d’habitation du Québec. Since the constituting acts of these bodies allow them to authorize a transfer expenditure without having to obtain approval from Parliament through an appropriations act, such expenditures and the corresponding liabilities are recognized once the transfer agreement has been duly authorized by the body and the recipient has satisfied the eligibility criteria.

Under these transfer programs, the Government also subsidizes the interest, which will be covered by the recipients in subsequent years, estimated at $224 M ($244 M as at March 31, 2013).


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115

14. Federal government transfers to be repaid


2014 2013

Equalization and Canada Health

and Social Transfer 475 713

Note: This item represents amounts related to measures adopted by the federal government to offset the decrease in transfers for 2003-2004 and 2004-2005. It is the remaining balance to be repaid out of an original amount of $2 377 M that does not bear interest and is repayable over 10 years until 2015-2016.


116

15. Pension plans and other employee future benefits

Liability regarding the pension plans and other employee future benefits (in millions of dollars)

Value before

unamortized

actuarial gains

and losses

Unamortized

actuarial

gains

(losses) 2014 2013

Pension plans

Obligations relating to accrued benefits 91 859 (7 752) 84 107 80 791

Retirement Plans Sinking Fund (46 113) (5 220) (51 333) (48 344)

Specific pension plan funds (4 038) (199) (4 237) (4 088)

41 708 (13 171) 28 537 28 359

Other employee future benefits

Obligations relating to accrued benefits 1 602 (180) 1 422 1 376

Other employee future benefit funds (1 278) (9) (1 287) (1 243)

324 (189) 135 133

42 032 (13 360) 28 672 28 492

The Government’s defined-benefit pension plans

Several defined-benefit pension plans have been put in place by the Government for its employees, for the

Members of the National Assembly and for the judges of the Court of Québec. The Government and

participants contribute to the funding of all of these plans. Most government employees participate in the

Government and Public Employees Retirement Plan (RREGOP). The other plans are for specific

categories of employees, such as management personnel and the employees of the Université du Québec

and its constituent universities.

The Government allows its enterprises and the bodies not included in its reporting entity1 to participate in

the pension plans that it has put in place. These enterprises and bodies thus pay contributions as an

employer to the plans concerned.

1 Most of these bodies do fiduciary transactions for the Government or provide services to entities in its reporting entity.


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117

15. Pension plans and other employee future benefits (cont’d)

Breakdown of participants by pension plan

Number of active

participants as at

December 31, 2013

Number of

beneficiaries as at

December 31, 2013

538 360 236 028

29 118 27 575

81 44 344

24 19 857

5 800 4 990

8 909 3 741

3 650 1 753

291 361

173 166

118 413

586 524 339 228

Pension Plan of the Members of the National Assembly (PPMNA)

Employment with the Gouvernement du Québec (PPFEQ)(2)

Pension Plan of the Judges of the Court of Québec and

of Certain Municipal Courts (PPJCQM)

Pension Plan for Federal Employees transferred to

Government and Public Employees Retirement Plan

(RREGOP)

Pension Plan of Management Personnel and Retirement Plan

for Senior Officials (PPMP and RPSO)

Superannuation Plan for the Members of the Sûreté du Québec (SPMSQ)

Teachers Pension Plan and Pension Plan of Certain

Teachers (TPP and PPCT)(1)

Civil Service Superannuation Plan (CSSP)(1)

Pension Plan of Peace Officers in Correctional Services

(PPPOCS)

Pension plan of the Université du Québec (PPUQ)

Note: In addition to these plans, a number of defined-benefit plans have been put in place by government enterprises (Hydro-Québec, Investissement Québec and Loto-Québec). Information on the assets and liabilities of these plans is presented in the financial statements of these enterprises.

(1) These plans have not admitted any new participants since July 1, 1973.

(2) This plan has not admitted any new participants since its creation on January 1, 1992.

The Government’s pension plans generate participants a set income upon retirement. This income is

calculated on the basis of participants’ average income for the best paid years, generally five, and their

number of years of service. The portion of benefits accrued after July 1, 1982 or, in the case of the PPUQ,

after January 1, 2005, is partially indexed to the cost of living; the portion of benefits accrued before those

dates is usually indexed.


118


Types of pension plans

The Government’s defined-benefit pension plans can be divided into two types: “cost-sharing” and

“cost-balance”. These two types of plans differ from one another in regard to the Government’s

responsibility for funding the cost of accrued benefits and to the obligations relating to the payment of

benefits.

“Cost-sharing” plans

So-called “cost-sharing” pension plans are joint plans for which the Government’s responsibility for

payment of the benefits granted by the plan is limited to its share of the cost of benefits accrued by

employees. Therefore, with this type of plan, the portion of obligations relating to accrued benefits for

which the Government is responsible is taken into account in the pension plans liability presented in the

Government’s consolidated financial statements.

Regarding obligations relating to accrued benefits payable by participants and the net assets available for

paying these benefits, the information is presented in the pension plans’ financial statements published by

the Commission administrative des régimes de retraite et d'assurances (CARRA).

“Cost-balance” plans

So-called “cost-balance” pension plans are plans for which the Government covers the total cost of

accrued benefits, net of the contributions paid by employees and certain employers. Therefore, with this

type of plan, all obligations relating to accrued benefits are taken into account in the pension plans

liability presented in the Government’s consolidated financial statements.

Retirement Plans Sinking Fund

The Government established the Retirement Plans Sinking Fund (RPSF) to create an asset for paying all

or part of the pension plans’ benefits. The RPSF is for plans whose benefits are paid by the general fund

of the Consolidated Revenue Fund.

Under the Financial Administration Act,1 the Minister of Finance may make long-term investments with

the Caisse de dépôt et placement du Québec, up to an amount equal to the balance of the non-budgetary

pension plans account,2 by depositing money taken from the general fund of the Consolidated Revenue

Fund to establish this sinking fund.

1 CQLR, chapter A-6.001

2 In this case, the balance of the non-budgetary pension plans account corresponds to the pension plans liability prior to taking the Retirement Plans Sinking Fund into account.


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119


In December 1999, under an agreement concluded during the renewal of the collective agreements of

government employees, the Government set the objective that the book value of the sums accumulated in

the RPSF would be equal, in 2020, to 70% of the value of its obligations relating to the accrued benefits

of the pension plans of public and parapublic employees. This objective does not take into account the

obligations of certain plans1 that have their own pension fund.

Specific pension plan funds

Presence of a pension plan fund

In accordance with their provisions, certain pension plans have their own pension fund for the payment of

accrued benefits. This fund is made up of the contributions of employers as well as those of participants if

the participants contribute to a “cost-balance” plan. The Government may also be required to pay

contributions into this fund.

If the sums in a pension fund are insufficient to pay the benefits payable by the Government, the benefits

are paid by the general fund of the Consolidated Revenue Fund. This situation does not apply to the

PPUQ.

The sums deposited in the pension plan funds are administered by the Caisse de dépôt et placement du

Québec, except in the case of the PPUQ, where they are administered by a private trust.

Absence of a pension plan fund

In the case of pension plans that do not have a pension fund, benefits payable by the Government are paid

out of the general fund of the Consolidated Revenue Fund. The contributions of participants and

employers to these plans are thus paid into the general fund of the Consolidated Revenue Fund.

1 The following plans have their own pension funds: the PPUQ, the PPFEQ and the SPMSQ (for years of service accrued after Decembre 31, 2006), and RREGOP, with regard to pension credits acquired following plan-to-plan transfers.


120


Characteristics of the Government’s defined-benefit plans

Plans(1)

Cost-

balance

Presence of a

specific fund

RREGOP

– regular service(2)

50.0% (3)

– service transferred from the TPP and the CSSP

– pension credits acquired following plan-to-plan transfers

PPMP

– regular service(2)

50.0% (3)

– service transferred from the TPP and the CSSP

RPSO

TPP

PPCT

CSSP

SPMSQ

– regular service since January 1, 2007 66.7% (4)

– regular service prior to January 1, 2007

PPUQ

PPPOCS(5)

54.0% (6)

PPJCQM

PPFEQ

PPMNA

Cost-

sharing

Types of plan

(1) The percentage indicated represents the portion of obligations relating to accrued benefits payable by the Government.

(2) Contributions paid by employers required to pay contributions are deposited in a transitional fund. This fund is liquidated regularly because the sums deposited in it are used to pay benefits.

(3) The Government’s portion is 58.3% in the case of benefits accrued prior to July 1, 1982.

(4) Every three years at the latest, the Government must pay its contributions into the fund, as determined by the actuarial valuations realized for that purpose.

(5) The Government has recognized an interest-bearing obligation in respect of this plan for contributions paid by participants into the general fund of the Consolidated Revenue Fund before January 1, 2013. This obligation will be repaid over four years, as of July 1, 2013, through annual payments into the contribution fund of participants in this plan.

(6) The Government’s portion is 46.0% in the case of benefits accrued prior to January 1, 2013. The government’s portion was increased from 46.0% to 54.0% for years of service after 2012, following the adoption of the Act to amend the Act respecting the Pension Plan of Peace Officers in Correctional Services and other legislative provisions (S.Q. 2013, chapter 9).


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121


Breakdown of the pension plans liability (in millions of dollars)

Value before

unamortized

actuarial gains

and losses

Unamortized

actuarial gains

(losses) (1)2014 2013

Obligations relating to

accrued benefits

RREGOP

– regular service 50 090 (3 691) 46 399 43 569

– transferred service 2 900 (169) 2 731 2 775

PPMP and RPSO

– regular service 11 524 (1 185) 10 339 9 627

– transferred service 1 169 (104) 1 065 1 079

TPP and PPCT 13 009 (1 721) 11 288 11 546

CSSP 3 980 (289) 3 691 3 848

SPMSQ 4 065 (289) 3 776 3 681

PPUQ 3 382 (202) 3 180 2 967

PPPOCS 785 (30) 755 842

PPJCQM 601 (45) 556 538

PPFEQ 148 (10) 138 133

PPMNA 206 (17) 189 186

91 859 (7 752) 84 107 80 791

Retirement Plans

Sinking Fund (46 113) (5 220) (51 333) (48 344)

Specific pension plan

funds

PPUQ fund (2 956) (189) (3 145) (3 016)

SPMSQ fund (330) 13 (317) (301)

Other pension plan funds (803) (23) (826) (824)

Valluation allowance - Other funds 51 0 51 53

(4 038) (199) (4 237) (4 088)

41 708 (13 171) 28 537 28 359

(1) The amortization period for actuarial gains and losses varies from 5 to 16 years depending on the plan concerned; it is 15 years in the case of RREGOP.


122


Change in obligations relating to accrued benefits (in millions of dollars)

2014 2013

Obligations, beginning of year 87 629 82 477


Interest on obligations 5 521 5 205

Benefits paid (5 326) (5 027)

Plan-to-plan transfers 28 24

Changes to plans 0 (79)

Actuarial (gains) losses 1 707 2 996

Change in obligations relating

to certain pension credits(1)

11 (25)

Obligations, end of year 91 859 87 629

(1) The Government's obligations regarding certain pension credits acquired following the transfer of supplemental pension plans to RREGOP correspond to the actuarial value of these acquired pension credits or to the actuarial value of the fund created to provide for their payment, whichever is higher.

Actuarial valuations

Every three years, the value of obligations relating to accrued benefits under the pension plans is

determined by actuarial valuations. The value of these obligations is extrapolated for the period between

two actuarial valuations.

CARRA actuaries conduct actuarial valuations for all of the plans, except the PPUQ, whose valuation is

prepared by an actuary firm from the private sector. The value as at March 31, 2014 of obligations

relating to accrued benefits was determined using actuarial valuations as at December 31 of the years

presented in the table below:

Date of the most recent actuarial valuations

December 31, 2013 December 31, 2012 December 31, 2011 December 31, 2010

(Filed in 2013-2014) (Filed in 2013-2014) (Filed in 2012-2013) (Filed in 2011-2012)

PPUQ RREGOP and PPMP RREGOP and PPMP RPSO

- Service transferred from - Regular service PPPOCS

the CSSP and the TPP TPP PPJCQM

RREGOP CSSP PPFEQ

- Pension credits related to PPMNA

plan-to-plan transfers

- Redemption of years of service

PPCT

SPMSQ

Note: The filing year corresponds to the government fiscal year for which an actuarial valuation of the plan is required, based on the timetable for preparing the valuation.


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123


Main economic assumptions used (in percent)

2014-2023

Yield, net of inflation 4.25

Inflation rate 2.03

Discount rate for obligations

relating to accrued benefits 6.28

Salary escalation rate, net of inflation 0.50

Plans administered by

CARRA PPUQ

2014-2023

2024 and

thereafter

2024 and

thereafter

4.45 4.45 4.25

0.53 0.50 0.50

2.03 2.50 2.50

6.48 6.95 6.75

Changes in the assumptions used in actuarial valuations may lead to an increase or decrease in the value

of obligations relating to accrued benefits. The table presented below, which takes the main economic and

demographic assumptions into account, shows the impact of a change of 0.25% in the value of obligations

for the four main pension plans, i.e. RREGOP – regular service, the PPMP – regular service, the TPP and

the CSSP. The table also shows the impact of a half-year difference in life expectancy. According to

current assumptions for the RREGOP, the life expectancy of beneficiaries aged 60 is 25.2 years for a man

and 28.4 years for a woman.

Impact of a change in the main assumptions on the value of obligations relating to accrued benefits as at March 31, 2014

Change

$M %

- Increase of 0.25% (2 140) - 2.8

- Decrease of 0.25% 2 260 + 3.0

- Increase of 0.25% (660) - 0.9

- Decrease of 0.25% 730 + 1.0

- Increase of 0.25% 480 + 0.6

- Decrease of 0.25% (470) - 0.6

- Increase of 0.5 year 640 + 0.9

- Decrease of 0.5 year (660) - 0.9- Life expectancy

- Inflation rate

- Salary escalation rate, net of inflation

Impact

- Yield, net of inflation

Assumptions


124


Change in the adjusted market value of the RPSF and specific pension plan funds (in millions of dollars)

2013

RPSF

SPMSQ

fund

PPUQ

fund

Other

pension

plan funds Total Total

Adjusted market value, beginning of year 40 798 306 2 659 780 44 5430

42 516

Anticipated investment income 2 661(1)

20 166 24 2 8710

2 730

Deposit from the general fund of the

Consolidated Revenue Fund 1 000 0 0 0 1 0000

1 149

Contributions paid(2)

0 0 113 218 3310

313

Benefits paid 0 (4) (110) (248) (362)0

(346)

Actuarial gains (losses) 1 654 8 128 18 1 8080

(1 794)

Change in the value of assets relating

to certain pension credits(3)

0 0 0 11 110

(25)

Adjusted market value, end of year(4)

46 113 330 2 956 803 50 202 44 543

2014

(1) For 2013-2014, the forecast return on the RPSF was 6.45% (6.50% in 2012-2013); the realized return, based on the market value of investments, was 12.72% (8.70% in 2012-2013).

(2) This item includes $142 M ($132 M in 2012-2013) in contributions from participants, government enterprises and organizations not included in the Government’s reporting entity.

(3) The Government's obligations regarding certain pension credits acquired following the transfer of supplemental pension plans to RREGOP correspond to the actuarial value of these acquired pension credits or the actuarial value of the fund created to provide for their payment, whichever is higher.

(4) The respective fair values of the assets of the RPSF, the SPMSQ fund and other specific pension funds deposited with the Caisse de dépôt et placement du Québec were $49 034 M, $354 M and $875 M ($42 562 M, $313 M and $831 M, respectively, as at March 31, 2013). The fair value of the PPUQ fund was $3 169 M ($2 790 M as at March 31, 2013).

RPSF investment policy as at March 31 of the current year

The sums deposited in the RPSF are entrusted to the Caisse de dépôt et placement du Québec. The Caisse

manages these sums according to the investment policy set by the Minister of Finance. This policy

provides for investments in a diversified portfolio that includes fixed income securities (e.g. bonds),

inflation-sensitive investments (e.g. real estate assets, infrastructure) and equity.

RPSF portfolio (in percent)

2014 2013

Fixed-income securities 35.75 35.75

Inflation-sensitive investments 16.00 15.50

Equity 48.25 45.25

Other investments - 3.50

100.00 100.00


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125


Pension benefits expense (in millions of dollars)

2014 2013


Contributions from participants and employers (160) (158)

2 129 1 900

Changes to plans 0 (79) (1)

Amortization of actuarial (gains) losses 793 698 (1)

Total 2 922 2 519

(1) The Act to amend the Act respecting the Pension Plan of Management Personnel and other legislative provisions (S.Q. 2012, chapter 6) has changed the qualification period for new participants after December 31, 2012 from 24 to 84 months, as well as certain provisions pertaining to pension eligibility criteria, return to work and the age limit for contributing to the plan. Owing to the reduction in obligations relating to accrued benefits that stemmed from these changes to the pension plans, an additional amortization of $79 M in actuarial losses has also been accounted.

Pension plan debt service expense (in millions of dollars)

2014 2013

Interest on obligations relating to accrued benefits 5 521 5 205

Investment income of the funds(1) (2 157) (2 131)

Total 3 364 3 074

(1) This income is reduced by $714 M ($599 M in 2012-2013) due to the amortization of $716 M in actuarial losses related to the RPSF and other specific pension plan funds ($591 M in 2012-2013) and a decrease of $2 M (increase of $8 M in 2012-2013) in the valuation allowance related to a specific pension plan fund.

Other employee future benefits

The Government has also introduced other future benefit programs for its employees, which provide for

the accumulation of sick leave and the payment of survivor’s pensions. The Université du Québec and its

constituent universities also offer their employees certain lump-sum payments upon early retirement as

well as a retiree group insurance plan. These programs give rise to long-term obligations for the

Government, which generally covers all of the costs.


126


Accumulated sick leave

Certain civil service employees and teachers in the school board network can accumulate, in a reserve, the

unused sick leave days they are entitled to annually. The days thus accumulated in the reserve can be

utilized as fully paid leave days in certain situations provided for in the collective agreements or, in the

case of civil service employees, for preretirement leave. In case of termination of employment, retirement

or death, civil service employees receive in money 50% of the value of these accumulated leave days, up

to an amount representing the equivalent of 66 days’ salary. Teachers receive in money the total value of

the accumulated leave days.

The Financial Administration Act authorizes the Minister of Finance to deposit money with the Caisse de

dépôt et placement du Québec, up to an amount equal to the value of its obligation relating to

accumulated sick leave in order to build up the Accumulated Sick Leave Fund. The purpose of this fund

is to provide for the payment of some or all of the benefits due to employees for accumulated sick leave.

Survivor’s Pension Plan

The Survivor’s Pension Plan stipulates that a pension is paid to the spouse and dependent children

following the death of an eligible person. The plan chiefly covers management and similar personnel in

the public and parapublic sectors. The Government pays amounts into a fund at the Caisse de dépôt et

placement du Québec, reserved exclusively for the payment of benefits earned by plan beneficiaries.

Breakdown of the other employee future benefits liability (in millions of dollars)

Value before

unamortized

actuarial gains

and losses

Unamortized

actuarial gains

(losses) (1)2014 2013

Obligations relating to accrued

benefits

Accumulated sick leave 937 (108) 829 790

Survivor's Pension Plan 424 (16) 408 408

Université du Québec programs 241 (56) 185 178

1 602 (180) 1 422 1 376

Other employee future benefit

funds

Accumulated Sick Leave Fund (915) 61 (854) (798)

Survivor's Pension Plan Fund (363) (70) (433) (445)

(1 278) (9) (1 287) (1 243)

324 (189) 135 133

(1) The amortization period for actuarial gains and losses varies from 11 to 19 years depending on the employee future benefit program concerned.


2 0 1 3 - 2 0 14

127


Change in obligations relating to accrued benefits (in millions of dollars)

2013

Accu-

mulated

sick leave

Survivor's

Pension

Plan

Université du

Québec

programs Total Total

Obligations, beginning of year 895 399 214 1 508 1 455

Cost of accrued benefits 86 10 16 112 106

Interest on obligations 53 25 9 87 80

Benefits paid (111) (33) (21) (165) (162)

Actuarial (gains) losses 14 23 23 60 29

Obligations, end of year 937 424 241 1 602 1 508

2014

Actuarial valuations

Every three years, the value of obligations relating to accrued other employee future benefits is

determined by actuarial valuations. For the period between two actuarial valuations, this value is

extrapolated. The value of obligations as at March 31, 2014 was determined using actuarial valuations

dated March 31, 2013 for accumulated sick leave, December 31, 2012 for the Survivor’s Pension Plan

and, March 31, 2012 for Université du Québec programs.

Main long-term economic assumptions used (in percent)

Accumulated

sick leave

Survivor's

Pension Plan

Université du

Québec

programs

Yield, net of inflation 4.45 4.45 -

Inflation rate 2.50 2.50 2.50

Discount rate for obligations

relating to accrued benefits 6.95 6.95 4.00

Salary escalation rate, net of inflation 0.50 - 0.50


128


Change in the adjusted market value of other employee future benefit funds (in millions of dollars)

2013

Accumulated

Sick Leave

Fund

Survivor's

Pension

Plan Fund Total Total

Adjusted market value, beginning of year 830 350 1 180 1 140

Anticipated investment income(1)

53 22 75 73

Deposits from the general fund of the

Consolidated Revenue Fund 0 5 5 10

Benefits paid 0 (33) (33) (33)

Actuarial gains (losses) 32 19 51 (10)

Adjusted market value, end of year(2)

915 363 1 278 1 180

2014

(1) For 2013-2014, the forecast returns on the assets of the Accumulated Sick Leave Fund and the Survivor’s Pension Plan Fund both amounted to 6.45% (6.50% in 2012-2013); the realized returns, based on the market value of investments, were 12.55% and 13.90% respectively (8.17% and 9.05% respectively in 2012-2013).

(2) The fair values of the assets of the Accumulated Sick Leave Fund and the Survivor’s Pension Plan Fund, deposited with the Caisse de dépôt et p lacement du Québec, were $968 M and $393 M respectively ($860 M and $372 M respectively as at March 31, 2013).

Accrued benefits expense relating to other employee future benefits (in millions of dollars)

2013

Accu-

mulated

sick leave

Survivor's

Pension

Plan

Université du

Québec


Cost of accrued benefits 86 10 # 16 # 112 # 106

Amortization of actuarial (gains) losses 11 (1) 3 13 7

Total 97 9 19 125 113

2014


2 0 1 3 - 2 0 14

129


Debt service expense relating to other employee future benefits (in millions of dollars)

2013

Accu-

mulated

sick leave

Survivor's

Pension

Plan

Université du

Québec


Interest on obligations relating to

accrued benefits 53 25 9 87 80

Investment income of the funds(1)

(56) (16) 0 (72) (70)

Total (3) 9 9 15 10

2014

(1) This income is increased by the amortization of $3 M ($1 M in 2012-2013) in actuarial gains related to the Accumulated Sick Leave Fund and reduced by the amortization of $6 M ($4 M in 2012-2013) in actuarial losses related to the Survivor’s Pension Plan Fund.


130

16. Risk management and derivative instruments

To meet the financial requirements arising from its operations and investment activities and from the

repayment of borrowings that are maturing, the Government has provided itself with an annual financing

and debt-management program targeting Canadian and international financial markets.

Participation in these markets involves various types of risk. Therefore, the Government devises

risk-management strategies using the different derivative instruments at its disposal.

Foreign exchange risk

Foreign exchange risk is the risk that the cash flows needed to pay the interest and repay the principal on

borrowings in foreign currency will vary according to exchange market fluctuations. To manage this risk,

the Government uses derivative instruments such as currency swap contracts and foreign exchange

forward contracts. The purpose of such contracts is to exchange cash flows from one currency to another.

These contracts will mature at various dates until 2037.

After taking into account derivative instruments used to manage foreign exchange risk, the structure of

the debt was 100.0% in Canadian dollars (100.0% in Canadian dollars as at March 31, 2013). This

percentage is calculated on the basis of the Government's gross debt.1 A change of 1.0% in the Canadian

dollar in relation to foreign currencies would not lead to any change in the gross debt1 and debt service.

Debt service takes into account foreign exchange gains of $6 million ($7 million in 2012-2013).

Interest rate risk

Interest rate risk is the risk that debt service will vary according to interest rate fluctuations. To reduce its

exposure to interest rate risk, the Government uses interest rate swap contracts or other types of derivative

instruments. Interest rate swap contracts make it possible to exchange payments of interest at fixed rates

for payments of interest at variable rates, or vice versa, on the basis of a reference par value.

After taking into account derivative instruments used to manage interest rate risk, the structure of the debt

was 87.3% at fixed interest rates and 12.7% at variable interest rates (87.2% at fixed interest rates

and 12.8% at variable interest rates as at March 31, 2013). These percentages are calculated on the basis

of the Government's gross debt.1

The fixed-rate debt is the debt that will not mature, and whose rates will not change, over the coming

year.

1 Gross debt including advance borrowings.


2 0 1 3 - 2 0 14

131

16. Risk management and derivative instruments (cont’d)

Credit risk

Credit risk is the risk that a counterparty will default on its contractual obligations. To protect itself from

such a risk within the scope of derivative instrument transactions, the Government has adopted a credit

risk management policy that limits potential counterparty losses.

A credit limit is set for each counterparty based mainly on its credit rating. When this limit is exceeded, a

process is implemented to ensure compliance with the limit set with the counterparty.

The Government deals with major financial institutions that receive credit ratings from at least two credit

rating agencies, one of which must be Standard & Poor’s or Moody’s. When a transaction agreement

comes into effect, the institution must have a rating of A or higher from at least one of these agencies. As

at March 31, 2014, all of the Government’s counterparties had met this criterion.

Liquidity risk

Liquidity risk is the risk that the Government will not be able to meet its financial commitments over the

short term. To offset this risk, the general fund of the Consolidated Revenue Fund has lines of credit

totalling C$1 165 million with various Canadian banking institutions. As at March 2014, the outstanding

balance on these lines of credit was $95 million ($7 million as at March 31, 2013).

The general fund of the Consolidated Revenue Fund has also concluded a credit agreement totalling

U.S. $3 500 million with a Canadian and international banking syndicate. No transactions were carried

out under this credit agreeement.

In addition, since fiscal 2012-2013, the general fund of the Consolidated Revenue Fund has kept, in the

sinking fund for government borrowings, prudential liquid assets invested mainly in highly liquid

securities of the federal Government of Canada. In the event of major disruptions in financial markets,

these securities can be sold and the liquid assets recovered rapidly, thus enabling the Government to

honour its financial commitments. As at March 31, 2014, these prudential liquid assets totalled

C$7 589 million (C$3 869 million as at March 31, 2013).


132

17. Debts

Debts by source and by currency (in millions of dollars)

2013

Debts contracted on financial

markets

Debts before

impact of

derivative

instruments

Derivative

instruments

- net

Debts after

impact of

derivative

instruments

Debts after

impact of

derivative

instruments

In Canadian dollars 152 101 36 906 189 007(1)

179 709(1)

In U.S. dollars 1 19 422 (18 054) 1 368(1)

1 345(1)

In yen (338) 1 939 (1 940) (1) (1)

In euros 0 12 339 (10 849) 1 490 (14)

In Swiss francs 0 3 371 (3 375) (4) (2)

Other currencies(2)

3 772 1 198 (1 198) ─ ─

190 370 1 490 191 860 181 037

LessDerivative instruments - net (1 490) 1 490 ─ ─

Sinking funds relating to

borrowings(1),(3)

0 0 0 0

In Canadian dollars 11 916 (83) 11 833 9 367

In U.S. dollars 1 280 83 1 363 1 320

In euros 1 541 0 1 541 ─

14 737 ─ 14 737 10 687

191 860 ─ 177 123 170 350

In Canadian dollars 0 3 909 3 226

Total debts before deferred

foreign exchange gains (losses) 191 860 ─ 181 032 173 576

Deferred foreign exchange gains (losses) 0 0 620 751

191 860 ─ 181 652 174 327

Debts arising from private-public

partnership agreements(4)

and

capital leases

2014

Equivalent in Canadian dollars

Sub-total

(1) The Government held $6 620 M in securities ($5 063 M as at March 31, 2013), i.e. $4 251 M ($3 871 M as at March 31, 2013) in sinking funds relating to borrowings, $1 564 M ($447 M as at March 31, 2013) in short-term investments, $120 M ($166 M as at March 31, 2013) in loans and portfolio investments and $685 M ($579 M as at March 31, 2013) in investments in government enterprises.

(2) For 2014, other currencies include the pound sterling, the Mexican peso and the Australian and New Zealand dollars. For 2013, other currencies include the pound sterling, the Mexican peso and the Australian, New Zealand and Hong Kong dollars.

(3) Payments to the sinking funds relating to borrowings stem from commitments made by the Government in contracts concluded when the borrowings were issued. These sinking funds were associated with $22 051 M in debts ($16 040 M as at March 31, 2013). They will be used to repay $11 833 M ($9 367 M as at March 31, 2013) of the debts in Canadian dollars, $1 363 M ($1 320 M as at March 31, 2013) of the debt in U.S. dollars and $1 541 M of the debts in euros (no debt in euros as at March 31, 2013).

(4) Private-public partnership agreements are contracts that provide for the design, construction, financing and maintenance of fixed assets by a private-public partnership and, in some cases, for the operation of these assets by the partnership. The debts related to these agreements, which have a term of 29 to 39 years, concern the construction of sections of highway for a total of $1 251 M, hospital centres for a total of $2 428 M, a performance hall for a total of $73 M and a correctional facility for a total of $20 M.


2 0 1 3 - 2 0 14

133

17. Debts (cont’d)

Breakdown of debts by category (in millions)

Debts contracted on

financial markets

In monetary

units

Equivalent in

Canadian

dollars

In monetary

units

Equivalent in

Canadian

dollars

IN CANADIAN DOLLARS

Short-term borrowings(1)

3 648 3 648 5 173 5 173

Treasury bills 3 318 3 318 3 317 3 317

Savings products 8 707 8 707 8 149 8 149

Bonds and notes 136 320 136 320 129 305 129 305

Mortgage loans 61 61 65 65

Other financial products 47 47 53 53

Currency swap

contracts 36 906 36 906 33 647 33 647

189 007 189 007 179 709 179 709IN U.S. DOLLARS

Commercial paper 2 203 2 435 1 618 1 644

Bonds and notes 15 369 16 987 15 364 15 603

Other financial products

Currency swap

contracts (16 334) (18 054) (15 657) (15 902)

1 238 1 368 1 325 1 345IN YEN

Bonds and notes 180 722 1 939 230 692 2 492

Currency swap

contracts (180 800) (1 940) (230 800) (2 493)

(78) (1) (108) (1)IN EUROS

Bonds and notes 8 103 12 339 6 049 7 890

Currency swap

contracts (7 125) (10 849) (6 060) (7 904)

978 1 490 (11) (14)IN SWISS FRANCS

Bonds and notes 2 697 3 371 2 498 2 680

Currency swap

contracts (2 700) (3 375) (2 500) (2 682)

(3) (4) (2) (2)IN POUNDS STERLING

Bonds and notes 50 92 50 77

Currency swap

contracts (50) (92) (50) (77)

─ ─ ─ ─

Total carried forward 191 860 181 037

2014 2013


134


Breakdown of debts by category (cont’d) (in millions)

Debts contracted on

financial markets

In monetary

units

Equivalent in

Canadian

dollars

In monetary

units

Equivalent in

Canadian

dollars

Total brought forward 191 860 181 037

IN MEXICAN PESOS

Bonds and notes 1 500 127 1 500 123

Currency swap

contracts (1 500) (127) (1 500) (123)

─ ─ ─ ─

IN AUSTRALIAN DOLLARS


Currency swap

contracts (674) (691) (674) (713)

─ ─ ─ ─

IN NEW ZEALAND DOLLARS


Currency swap

contracts (300) (288) (300) (255)

─ ─ ─ ─

IN HONG KONG DOLLARS


Currency swap

contracts 0 0 (712) (93)

─ ─ ─ ─

191 860 181 037Less

Sinking funds relating to

borrowings

In Canadian dollars 11 833 11 833 9 367 9 367

In U.S. dollars 1 233 1 363 1 300 1 320

In euros 1 012 1 541 ─

14 737 10 687

Sub-total 177 123 170 350

Debts arising from agreements and

contracts

IN CANADIAN DOLLARS

Private-public partnership agreements 3 772 3 772 3 083 3 083

Capital leases 137 137 143 143

Sub-total 3 909 3 909 3 226 3 226

Total debts before deferred foreign

exchange gains (losses) 181 032 173 576

Deferred foreign exchange gains (losses) 620 751

181 652 174 327

2014 2013

(1) Short-term borrowings included banker’s acceptances, bank loans and lines of credit totalling $3 109 M ($3 377 M as at March 31, 2013), discounted notes totalling $479 M ($1 700 M as at March 31, 2013) and other financial products totalling $60 M ($96 M as at March 31, 2013).


2 0 1 3 - 2 0 14

135


Sinking funds relating to borrowings Change in fund balance for the fiscal year ended March 31, 2014 (in millions of dollars)

2014 2013


Plus

Payments from the general fund of the Consolidated Revenue

Fund and from other entities included in the Government's

reporting entity 3 677 3 975

Net revenue 297 405

14 657 10 788

Less

Sums used to repay debts 90 105


_____________________________________________________________

Sinking funds relating to borrowings Financial position as at March 31, 2014 (in millions of dollars)

2014 2013

Investments

Banker's acceptances 755 425

Treasury bills 6 049 3 869

Deposit certificates 327 190


14 658 10 621

Other asset items

Cash 1 1

Accounts receivable and accrued interest 78 65

79 66

Funds balance before deferred foreign exchange (gains) losses 14 737 10 687

Deferred foreign exchange (gains) losses (170) (4)

Fund balance 14 567 10 683


136


Debt repayment schedule (in millions of dollars)

Debts arising

from

agreements

and contracts

Maturing on

March 31

In Canadian

dollars(1)

In U.S.

dollars In yen In euros

In Swiss

francs

Other

currencies Sub-total

In Canadian

dollars Total

2015 25 430 (171) 0 (1) 0 0 25 258 1 017 26 275

2016 10 685 20 0 0 0 0 10 705 185 10 890

2017 13 876 20 (1) (5) 0 0 13 890 88 13 978

2018 10 981 151 0 (4) 0 11 128 129 11 257

2019 15 691 211 0 (1) 0 15 901 179 16 080

76 663 231 (1) (7) (4) ─ 76 882 1 598 78 480

2020-2024 49 222 (608) (44) 48 570 402 48 972

2025-2029 5 979 145 0 0 0 6 124 391 6 515

2030-2034 7 249 237 0 0 0 0 7 486 478 7 964

2035-2039 12 835 0 0 0 0 0 12 835 581 13 416

2040 and thereafter 25 226 0 0 0 0 0 25 226 459 25 685

177 174 5 (1) (51) (4) ─ 177 123 3 909 181 032

Debts contracted on markets

(1) The maturity of debts contracted on markets in Canadian dollars takes into account, for 2015, the repayment of $3 318 M in treasury bills and $3 648 M in short-term borrowings. In regard to savings products redeemable on demand, the schedule provides for the repayment of $1 706 M in 2015, $609 M in 2016, $684 M in 2017, $1 001 M in 2018, $694 M in 2019, $3 995 M in 2020-2024 and $18 M in 2025-2029.

Repayment of debts by the sinking funds relating to borrowings (in millions of dollars)

Maturing

on March 31

In Canadian

dollars In U.S. dollars In Euros Total

2015 130 0 0 130

2016 32 0 0 32

2017 1 435 0 0 1 435

2018 783 0 0 783

2019 516 0 0 516

2 896 ─ ─ 2 896

2020-2024 4 681 845 1 541 7 067

2025-2029 1 394 518 0 1 912

2030-2034 2 836 0 0 2 836

2035-2039 0 0 0 ─

2040 and thereafter 26 0 0 26

11 833 1 363 1 541 14 737


2 0 1 3 - 2 0 14

137


Weighted average interest rate (in percent)

2014 2013

In Canadian dollars 3.97 4.04

In U.S. dollars 4.66 4.82

In yen 3.94 3.45

In euros 3.75 4.21

In Swiss francs 2.69 2.78

Global 3.91 4.00

Note: The interest rate for each currency corresponds to the weighted average effective rate on short- and long-term borrowings in effect as at March 31. The interest rate, in Canadian dollars, is established taking into account a weighted average interest rate of 4.81% (4.86% in 2013) for debts arising from private-public partnership agreements and capital leases with an average term of 35 years. The global rate also includes the impact of interest rate and currency swap contracts.


138

18. Fixed assets

Fixed assets are recorded at cost. They are depreciated on a straight-line basis over their useful life.

Category Useful life

Buildings(1)

(Institutional and operational buildings, leasehold improvements)

10 to 50 years

Facilities(1)

(Organization and development of natural spaces: land, parks, forests,

watercourses, etc.) 5 to 20 years

Complex networks(2)

(Road, maritime and air transportation infrastructures, natural resource

development networks, dams and other large structures, etc.)

10 to 60 years

Equipment(1)

(Transport vehicles, machinery, furniture, data processing and office automation

equipment, specialized medical and educational equipment, etc.) 3 to 30 years

Development of data processing systems

(Design, production and implementation of data processing systems, including the

cost of equipment and software acquired for this purpose)

5 to 10 years

(1) These categories include fixed assets rented under capital leases.

(2) Except for certain Laval metro infrastructures that are depreciated on a straight-line basis over a period of 100 years.


2 0 1 3 - 2 0 14

139

18. Fixed assets (cont’d)


Land Buildings Facilities

Complex

networks Equipment

Development

of data

processing

systems

2014

Total

Cost

Opening balance 2 154 42 108 931 35 021 14 834 4 436 99 484

Acquisitions 156 3 413 175 2 206 1 214 404 7 568

Impact of disposals and

reductions in value (2) (87) (2) (170) (753) (138) (1 152)

Restatements and

other adjustments 51 (65) 14 68 (68) 0 ─

Closing balance 2 359 45 369 1 118 37 125 15 227 4 702 105 900

Opening balance 0 17 449 350 13 153 9 263 2 584 42 799

Depreciation

expenses 0 1 039 40 1 088 966 327 3 460


reductions in value 0 (23) (1) (163) (724) (110) (1 021)

Restatements and

other adjustments 0 0 0 13 (13) 0 ─

Closing balance ─ 18 465 389 14 091 9 492 2 801 45 238

Net book value 2 359 26 904 729 23 034 5 735 1 901 60 662(1),(2)

Accumulated depreciation

(1) The total for fixed assets included:

fixed assets rented under capital leases totalling $133 M, including $20 M for equipment and $106 M for buildings. The depreciation expense for these fixed assets was $12 M;

fixed assets acquired under private-public partnership agreements totalling $5 747 M, including $2 195 M for complex networks, $3 364 M for buildings, $148 M for facilities and $41 M for equipment. The depreciation expense for these fixed assets was $69 M;

fixed assets in the form of property under construction, improvements or development totalling $7 785 M including $5 249 M for buildings, $196 M for facilities, $800 M for complex networks, $790 M for equipment and $747 M for the development of data processing systems. No depreciation expense is associated with these fixed assets.

(2) Financing charges of $31 M were capitalized during the fiscal year in the cost of the fixed assets. In addition, fixed assets acquired through donation or for a nominal value during the fiscal year were recorded at their fair value, i.e. $15 M.


140

18. Fixed assets (cont’d)


Land Buildings Facilities

Complex

networks Equipment

Development

of data

processing

2013

Total

Cost

Opening balance 2 026 39 023 836 32 116 14 154 4 165 92 320

Acquisitions 112 3 253 97 3 213 1 233 394 8 302


reductions in value 16 (168) (2) (308) (553) (123) (1 138)

Restatements and

other adjustments 0 0 0 0 0 ─

Closing balance 2 154 42 108 931 35 021 14 834 4 436 99 484

Opening balance 0 16 528 313 12 485 8 857 2 315 40 498

Depreciation

expenses 0 992 37 957 947 336 3 269


reductions in value 0 (71) 0 (289) (541) (67) (968)

Restatements and

other adjustments 0 0 0 0 0 0 ─

Closing balance ─ 17 449 350 13 153 9 263 2 584 42 799

Net book value 2 154 24 659 581 21 868 5 571 1 852 56 685(1),(2)

Accumulated depreciation

(1) The total for fixed assets included:

fixed assets rented under capital leases totalling $136 M, including $21 M for equipment and $108 M for buildings. The depreciation expense for these fixed assets was $12 M;

fixed assets acquired under private-public partnership agreements totalling $4 740 M, including $2 251 M for complex networks and $2 388 M for buildings. The depreciation expense for these fixed assets was $30 M;

fixed assets in the form of property under construction, improvements or development totalling $6 934 M including $4 690 M for buildings, $103 M for facilities, $687 M for complex networks, $745 M for equipment and $679 M for the development of data processing systems. No depreciation expense is associated with these fixed assets.

(2) Financing charges of $32 M were capitalized during the fiscal year in the cost of the fixed assets. In addition, fixed assets acquired through donation or for a nominal value during the fiscal year were recorded at their fair value, i.e. $78 M.


2 0 1 3 - 2 0 14

141

19. Contractual obligations

Contractual obligations related to expenditures

Contractual obligations by expenditure category (in millions of dollars)

2014 2013

Transfers - principal(1),(2),(3)

Grants for repayment of the principal on borrowings

contracted by recipients 8 030 7 697

Grants for repayment of the principal on borrowings

to be contracted by recipients 5 227 4 629

Grants for repayment of the cost of recipients'

fixed assets 754 933(4)

Transfers - agreements concerning non-capital expenditures(1),(2),(3)

9 816 9 824(4)

23 827 23 083

Operating 0 0

Capital leases 3 332 3 163

Supplies of goods and services(2),(5)

14 865 13 683

Other 94 81

42 118 40 010

(1) The portion of transfer agreements that does not meet the criteria for the recognition of a transfer expenditure on the date of the consolidated financial statements is presented in contractual obligations. A transfer expenditure is recognized once it has been duly authorized in accordance with the governance rules of the entity that granted the transfer and the recipient has satisfied all the eligibility criteria.

(2) Contractual obligations have been reduced to take into account an amount of $422 M in contributions by the federal government and other third parties ($424 M in 2012-2013). These contributions were granted to repay the cost of fixed assets covered by the recipients or to support employment and training measures and services in Québec.

(3) In addition to this amount, the Government subsidizes the interest, under these transfer agreements, which will be covered by the recipients in subsequent years, estimated at $4 621 M ($4 492 M as at March 31, 2013).

(4) In fiscal 2013-2014, The Société d’habitation du Québec finalized its analysis following the application of the revised accounting standard on government transfers (PS 3410) of the Public Sector Accounting Board (PSAB), effective April 1, 2012. This exercise gave rise to an upward adjustment of $198 M in contractual obligations, i.e. a decrease of $36 M in “Transfers – principal: grants for repayment of the cost of recipients’ fixed assets” and an increase of $234 M in “Transfers – agreements concerning non-capital expenditures”.

(5) Contractual obligations related to the supply of goods and services included an amount of $7 795 M ($7 661 M as at March 31, 2013) stemming from private-public partnership agreements.


142

19. Contractual obligations (cont’d)

Schedule of contractual obligations by expenditure category (in millions of dollars)

Maturing on

March 31

Transfers –

grants for

repayment of

the principal on

borrowings

contracted (1)

Transfers –

grants for

repayment of

the principal on

borrowings to

be contracted (2)

Transfers –

grants for

repayment of

the cost of

fixed assets

Transfers –

agreements

concerning

non-capital

expenditures

Capital

leases

Supplies of

goods and

services Other Total

2015 890 113 468 2 273 0 553 # 2 619 # 49 6 965

2016 835 213 126 772 0 482 # 1 570 # 12 4 010

2017 777 261 125 615 0 411 # 1 328 # 10 3 527

2018 746 294 65 491 0 341 # 781 # 9 2 727

2019 681 305 26 415 0 287 # 544 # 8 2 266

3 929 1 186 810 4 566 2 074 6 842 88 19 495

2020-2024 2 264 1 578 4 1 796 807 # 1 656 # 5 8 110

2025-2029 996 1 075 2 1 228 370 # 1 267 # 1 4 939

2030-2034 670 962 0 752 51 # 1 425 # 0 3 860

2035-2039 170 416 0 553 11 # 1 548 # 0 2 698

2040 and thereafter 1 10 0 1 136 19 # 2 242 # 0 3 408

8 030 5 227 816 10 031 3 332 14 980 94 42 510

No fixed

maturity date 0 0 0 0 0 13 0 0 # 17 # 0 30

8 030 5 227 816 10 044 3 332 14 997 94 42 540

Contributions by the

federal government

and other third parties 0 0 (62) (228) 0 (132) 0 (422)

8 030 5 227 754 9 816 3 332 14 865 94 42 118

(1) The borrowings were contracted by the recipients as follows:

2014 2013

Borrowings contracted with government bodies

Financement-Québec 3 399 2 691

Fonds de financement 459

3 399 3 150

Borrowings contracted with financial institutions 4 679 4 603

Contribution from the sinking fund relating to borrowings by university

establishments not included in the Government's reporting entity (48) (56)

8 030 7 697

(2) In the case of grants for the repayment of the principal on borrowings that are to be contracted by recipients and whose maturity date is still not known, the date is established on the basis of grants’ probable payment periods depending on the type of recipients, i.e. 25 years for university establishments, 20 years for municipalities and municipal bodies and 5 years for other recipients.


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143


Contractual obligations related to transfer expenditures – agreements

concerning non-capital expenditures

Agreements between the Gouvernement du Québec and the Québec Cree

An agreement was signed by the Government and the Québec Cree in February 2002 to help the Cree

achieve autonomy and take charge of their development. The agreement also aims to more fully engage

the Cree in economic development activities in the territory covered by the James Bay and Northern

Québec Agreement (JBNQA).

This agreement provides in particular for annual transfer payments to the James Bay Cree over a period

of 50 years, i.e. from 2002-2003 to 2051-2052. In return, the Cree must assume the obligations of the

Gouvernement du Québec, Hydro-Québec and the Société d’énergie de la Baie-James under certain

provisions of the JBNQA pertaining to the Cree's economic and community development. The payments

to be made in the coming years, i.e. until 2052, correspond to the higher of $70 million or that amount

indexed to take into account the change in the value of hydroelectric production, mining and forest

harvesting in JBNQA territory. The payment in 2013-2014 amounted to $85 million ($89 million

in 2012-2013). Considering the indexation for 2014, the minimum annual payments provided for in the

coming years amount to $87 million. As at March 31, 2014, the minimum balance payable

was $3 289 million ($3 319 million as at March 31, 2013).

Another agreement was concluded in May 2007 between the Gouvernement du Québec, the Grand

Council of the Crees and the Cree Regional Authority to improve the administration of justice and in

correctional services in Cree communities. The minimum annual payments provided for in the coming

years amount to $17 million and they are subject to indexation until 2027. As at March 31, 2014, the

minimum balance payable was $220 million ($231 million as at March 31, 2013).

Agreement respecting global funding for the Kativik Regional Government

An agreement was signed by the Gouvernement du Québec and the Kativik Regional Government in

March 2004 to simplify the terms and conditions for transfers from various Québec government

departments to the Kativik Regional Government. The agreement also grants the Kativik Regional

Government greater autonomy in allocating funds based on regional priorities.

The minimum annual payments provided for in the coming years amount to $55 million and they are

subject to indexation until 2028. As at March 31, 2014, the minimum balance payable was $777 million

($785 million as at March 31, 2013).


144


Contractual obligations related to transfer expenditures – agreements

concerning non-capital expenditures (cont'd)

Partnership agreement on economic and community development in Nunavik

A partnership agreement on economic and community development in Nunavik was signed in April 2002

between the Gouvernement du Québec, the Makivik Corporation and the Kativik Regional Government to

meet the specific needs of the people in Nunavik. To that end, the Government will fund economic and

community projects, thus providing local communities with better economic and community development

prospects.

The minimum annual payments provided for in the coming years amount to $34 million and they are

subject to indexation until 2027. As at March 31, 2014, the minimum balance payable was $442 million

($469 million as at March 31, 2013).

Other transfer agreements1

The contractual obligations related to other transfer agreements stem from agreements on access to places

in residential and long-term care facilities, totalling $1 337 million ($1 383 million as at March 31, 2013),

the National Policy on Rurality, totalling $468 million ($41 million as at March 31, 2013), services

provided by ambulance companies, totalling $301 million ($538 million as at March 31, 2013), and the

fiscal and financial partnership with the municipalities, totalling $288 million ($288 million as at

March 31, 2013). They also include contractual obligations stemming from agreements on the non-profit

housing program, totalling $262 million ($249 million as at March 31, 2013), block funding for northern

villages in the Kativik region, totalling $206 million ($214 million as at March 31, 2013), the promotion

and development of the metropolitan region, totalling $153 million ($198 million as at March 31, 2013),

the partnership for an innovative, healthy Québec, totalling $125 million (no contractual obligations as at

March 31, 2013), the subsidy agreement reached with Ville de Montréal, totalling $106 million

($114 million as at March 31, 2013), services offered by family medicine groups, totalling $104 million

($130 million as at March 31, 2013), the development of young children, totalling $103 million

($103 million as at March 31, 2013), support for caregivers, totalling $102 million ($102 million as at

March 31, 2013) and other transfers, totalling $1 533 million ($1 660 million as at March 31, 2013).

1 In addition to these amounts, the Government covers, through the payment of grants, the interest on borrowings related to certain agreements.


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145


Contractual obligations related to investments

Contractual obligations by investment category (in millions of dollars)

2014 2013

Acquisition of fixed assets 5 185 6 518

Loan and investment pledges 2 509 1 881

7 694 8 399

Acquisition of fixed assets

The Government has concluded various agreements for the acquisition of fixed assets. These agreements

provide for the payment, in the coming years, of a total of $5 185 million ($6 518 million

as at March 31, 2013), including $1 886 million for the acquisition of fixed assets stemming from

private-public partnership agreements ($2 770 million as at March 31, 2013). The contractual obligations

related to these agreements for the acquisition of fixed assets have been reduced to take into account an

amount of $165 million ($138 million as at March 31, 2013) in contributions by the federal government

and other third parties.

Loan and investment pledges

The Government has entered into various agreements under which it is commited to granting loans to

businesses or, in other cases, to investing in them for a total of $2 509 million ($1 881 million as at

March 31, 2013).


146

20. Loan guarantees

Under its various financial assistance programs, the Government has guaranteed borrowings contracted

by third parties for a total contingent liability of $11 638 million ($11 160 million as at March 31, 2013),

for which an allowance for losses on guaranteed financial initiatives of $666 million ($696 million as at

March 31, 2013) has been recorded. The guarantees ensure the payment of all or part of the principal,

interest or both the principal and interest on debts if the borrower fails to pay.

Loan guarantees by category (in millions of dollars)

2014 2013

Enterprises 1 873 1 785

Non-profit organizations and cooperatives 1 638 1 433

Forest, farm and fisheries producers 4 562 4 474

Students 3 565 3 465

Other (0) 3

11 638 11 160

Allowance for losses on guaranteed financial

initiatives (Note 13) (666) (696)

10 972 10 464

Guarantees – Borrowings contracted by enterprises (in millions of dollars)

2014 2013

Guarantees granted by the Economic Development Fund(1)

1 858 1 773

Other 15 12

1 873(2),(3)

1 785(2),(3)

Allowance for losses on guaranteed financial initiatives (239) (267)

1 634 1 518

(1) The guarantees were granted by the Government under the Act respecting Investissement Québec (CQLR, chapter I-16.0.1). In addition to loan guarantees, the guarantees include loss and payment guarantees introduced to facilitate the funding of aircraft purchasers.

(2) This total excluded $339 M in authorized loan guarantees that were not yet in effect ($774 M as at March 31, 2013).

(3) The total value of securities and surety received against guarantees was $1 240 M ($1 119 M as at March 31, 2013).


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147

20. Loan guarantees (cont’d)

Guarantees – Borrowings contracted by non-profit organizations and cooperatives (in millions of dollars)

2014 2013

Guarantees granted by the Société d'habitation du Québec(1)

Loan guarantees(2)

1 407 1 181(3)

Other guarantees(4)

231 252

1 638 1 433


1 596 1 395

(1) These guarantees are granted by the Government under the Act respecting the Société d'habitation du Québec (CQLR, chapter S-8).

(2) The Government guarantees borrowings with financial institutions contracted by non-profit organizations and cooperatives for periods of 25 or 35 years following the approval of an extension by the Government. The principal and interest associated with these borrowings are covered by the organization. The borrowings finance the cost of acquiring buildings.

(3) In fiscal 2013-2014, the Société d’habitation du Québec finalized its analysis to determine the impact of the application of the revised accounting standard on government transfers (PS 3410) of the Public Sector Accounting Board (PSAB), effective April 1, 2012. This exercise gave rise to a downward adjustment of $105 M in loan guarantees granted by the Société d’habitation du Québec.

(4) The Government has concluded agreements with the Canada Mortgage and Housing Corporation (CMHC), through the Société d’habitation du Québec, under which it is committed to buying property taken over by the CMHC when a borrower defaults on a borrowing, for an amount equal to the value of the claim paid to the approved lender plus incidental expenses. The guarantees granted cover 25-year periods, except if they are related to borrowings granted for projects in urban regions under the private non-profit housing program, in which case they cover periods of 35 years. The payment of the principal and interest associated with these borrowings is covered by the organizations concerned. The borrowings finance the cost of acquiring buildings.

Guarantees – Borrowings contracted by forest, farm and fisheries producers (in millions of dollars)

2014 2013

Guarantees granted by La Financière agricole du Québec(1)

4 455 4 371

Other 107 103

4 562(2)

4 474(2)


4 477 4 378

(1) These guarantees are granted by the Government under the Act respecting La Financière agricole du Québec (CQLR, chapter L-0.1). This amount corresponds to balances of principal and interest on borrowings for which La Financière agricole du Québec reimburses the lenders’ residual losses and related charges. The producers’ assets are held as security by the lenders; they consist particularly of farm or forest production units, milk quotas and surety.

(2) This amount excluded $455 M in authorized loan guarantees not yet in effect ($384 M as at March 31, 2013).


148

20. Loan guarantees (cont’d)

Guarantees – Borrowings contracted by students (in millions of dollars)

2014 2013

Borrowings for which the Government pays interest as

long as the borrower is a student(1),(2)

1 595 1 564

Borrowings for which borrowers are responsible for

paying principal and interest(1)

1 969 1 900

Borrowings for the purchase of a personal computer

for which borrowers are responsible for paying

interest(1)

1 1

3 565 3 465


3 265 3 170

(1) These guarantees are granted by the Government under the Act respecting financial assistance for education expenses (CQLR, chapter A-13.3). It guarantees the reimbursement of losses of principal and interest to lending institutions.

(2) These borrowings, bear interest at the banker’s acceptance rate plus 150 basis points. The interest that will be subsidized by the Government in subsequent years is estimated at $95 M ($90 M in 2013).


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149

21. Contingencies

Legal proceedings and disputes

A number of claims have been instituted against the Government, which is also involved in legal

proceedings before the courts. These different disputes result from breaches of contract and damages

suffered by individuals or property. In some cases, the amounts claimed are mentioned, in others, no

mention is made of them. Claims for which an amount has been established total $1 154 million, after

deducting the allowances taken by the Government in this regard. Since the outcome of these disputes is

uncertain, the Government cannot determine its potential losses. The Government records an allowance

for a given claim under “Accounts payable and accrued expenses” only once it appears likely that the

claim will give rise to a disbursement and the amount payable can be reasonably estimated.

Some of Québec's Aboriginal communities have instituted legal proceedings involving $6 563 million in

damages and interest against the Government for land claims, the recognition of certain ancestral rights

and other related questions. These files are at different stages (some proceedings being currently

suspended or inactive) and should eventually be resolved through negotiations, rulings or the

abandonment of proceedings by applicants. Since the outcome of these files is uncertain, the Government

cannot determine its potential losses.

Environmental liability

The Government has recorded an environmental liability for the cost of remediating contaminated land

under its responsibility or likely to come under its responsibility to the extent that the amount can be

estimated.

An amount of $3 175 million is presented as at March 31, 2014 under the heading "Other liabilities" for

the 2 196 properties inventoried. Different methods are used to estimate remediation and management

costs. The amount estimated for each file has been increased to take into account the degree of precision

of the method used. Thus, the environmental liability recorded as at March 31, 2014 takes into account an

increase of $953 million in costs ($1 007 million as at March 31, 2013).

In some cases, the probability that the Government will have to cover the remediation cost could not be

established. In others, the value of the costs it will have to assume could not be estimated.


150

22. Cash flow information

Change in financial assets and liabilities related to operations (in millions of dollars)

2014 2013

Financial assets

Cash and notes on hand and outstanding deposits 103 (119)

Accounts receivable 2 492 (2 175)

Accrued interest on loans and portfolio investments 0 8

Inventories and other assets intended for sale 48 (17)

Deferred expenses related to debts (189) (319)

2 454 (2 622)

Liabilities

Outstanding cheques (163) 86

Accounts payable and accrued expenses 842 17

Federal government transfers to be repaid (238) (238)

Other liabilities (131) (140)

Deferred revenue (1 150) 1 918

(840) 1 643

1 614 (979)

Interest paid 7 581 7 276

Net financial requirements and financing transactions (in millions of dollars)

2014 2013

Liquid assets provided by operating activities 7 477 3 265

Liquid assets used for investment activities (1 349) (775)

Liquid assets used for fixed asset

investment activities (6 537) (6 608)

Net financial requirements (409) (4 118)

Liquid assets provided by financing activities 2 746 3 218

Change in liquid assets during the fiscal year (2 337) 900

Financing transactions 409 4 118


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151

22. Cash flow information (cont’d)

Non-monetary transactions not included in the consolidated statement of cash flow (in millions of dollars)

2014 2013

Operating activities

Accounts receivable 78 65

Deferred expenses related to debts (3)

Accounts payable and accrued expenses (122) 139

(47) 204

Fixed asset investment activities

Acquisition of fixed assets (947) (1 551)

(947) (1 551)

Financing activities

Borrowings made 1 072 1 412

Borrowings repaid (78) (65)

994 1 347

Note: These non-monetary transactions stem mainly from private-public partnership agreements.


152

23. Asset-backed term notes (ABTNs)

Asset-backed term notes (ABTNs)

On January 21, 2009, an agreement was concluded between the Pan-Canadian Investors Committee and

protection buying banks on the restructuring of asset-backed commercial paper (ABCP) issued by third

parties. This ABCP was replaced by longer term notes, or asset-backed term notes (ABTNs). This

agreement also led to the creation of three new trusts called “master asset vehicles” (MAV 1, MAV 2 and

MAV 3).

ABTNs are securities backed by a range of financial instruments, whose maturities better match those of

the underlying assets. The underlying assets for MAV 1 and MAV 2 are basically credit default swaps,

while MAV 3 contains traditional assets such as commercial or residential mortgage debts.

As at March 31, 2014, ABTNs with a face value of $337 million ($340 million as at March 31, 2013) and

a net value of $290 million ($284 million as at March 31, 2013) were held by:

certain line-by-line consolidated bodies, for a face value of $218 million ($220 million as at

March 31, 2013);

government enterprises, for a face value of $119 million ($120 million as at March 31, 2013).

ABTNs held as at March 31, 2014 by category (in millions of dollars)

Face

value

Pan-Canadian Investors Committee restructuring plan

MAV 2

Class A-1 155

Class A-2 111

Class B 20

Class C 9

Tracking notes for high-risk assets 2

297

MAV 3 0

Tracking notes for traditional assets 4

Tracking notes for high-risk assets 22

26

Total 323

Other restructured ABTNs(1)

14

337

(1) Certain entities in the Government's reporting entity hold bank-sponsored ABTNs that were issued by financial-institution-sponsored trusts. These ABTNs were also restructured in 2008, outside the Pan-Canadian Investors Committee restructuring plan.


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153

23. Asset-backed term notes (ABTNs) (cont’d)

ABTNs were also held through participation units in funds entrusted to the Caisse de dépôt et placement

du Québec (CDPQ). On January 1, 2010, the CDPQ created a specialized ABTN portfolio and, at the

same time, all the assets and liabilities related to third-party and bank-sponsored ABTNs were transferred

from the specialized bond portfolio to this new specialized portfolio.

Share of ABTNs held through participation units in the specialized ABTN portfolio of the CDPQ (in millions of dollars)

2014 2013 2014 2013

21.3% 2 151 2 374 2 084 2 141

0.5% 46 51 45 46

0.9% 91 101 88 91

2 288 2 526 2 217 2 278

Generations Fund

Other

Share of cost Share of fair value

Retirement Plans

Sinking Fund

Share of

ABTNs held

In addition to the amounts invested in the ABTNs that it presents in its financial statements, the CDPQ

also mentions contingencies stemming from the guarantees it issued as part of the restructuring efforts.

The share of these guarantees allocated to participation units held by entities in the Government’s

reporting entity amounted to $1 400 million ($1 400 million as at March 31, 2013).

Establishing the fair value of ABTN securities

Since there was no active market as at March 31, 2014 for ABTN securities issued in the wake of the

restructuring efforts, entities in the Government's reporting entity that held such securities established fair

values for the various types of securities using a discounted cash flow model. These valuations take into

account specific aspects of the restructuring plan and use, as much as possible, observable market data

such as interest rates and credit quality and price as at March 31, 2014. The calculations are based

partially on assumptions that are not supported by prices or rates observed on the market. The main

assumptions used in the model are related to the default rates on the underlying assets, the loss rates

associated with each default, underlying assets returns and discounted cash flow rates.


154

23. Asset-backed term notes (ABTNs) (cont’d)

The value of ABTNs held by the CDPQ and issued by MAV 2 and MAV 3 has been determined using a

similar method. The CDPQ used a different method for its MAV 1 ABTNs and certain other restructured

ABTNs, but the results are consistent with those obtained by the entities in the Government’s reporting

entity.

Impact on the Government's results as at March 31, 2014

ABTNs of entities in the Government's reporting entity

This valuation led to the recognition of valuation gains of $8 million ($13 million in 2012-2013) in the

Government’s results for the year ended March 31, 2014.

Taking into account the impact of writing off certain ABTNs, the accumulated total valuation losses

recorded amounted to $47 million ($56 million as at March 31, 2013).

CDPQ participation units

As for valuation losses related to ABTNs held through participation units in funds entrusted to the CDPQ

by entities in the Government’s reporting entity, they are recognized in the Government’s consolidated

operations in accordance with its accounting policies. Accordingly, $82 million was recorded in the

Government’s results in regard to these losses ($77 million in 2012-2013).

Measurement uncertainty

The current value of ABTNs may vary in relation to their definitive value in subsequent periods

particularly because of changes to the main assumptions used for discount rates, credit spreads,

anticipated returns, the credit risk of underlying assets and the value of commitments and guarantees.


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155

24. Comparative figures

Certain comparative figures for 2013 were reclassified for consistency with the presentation adopted

in 2014.


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157

APPENDIX 1

National Assembly, appointed persons, government departments and bodies

whose financial transactions were conducted from

the general fund of the Consolidated Revenue Fund

National Assembly

Persons Appointed by the National Assembly

Auditor General

Chief Electoral Officer – Commission de la représentation

Lobbyists Commissioner

Public Protector

The Ethics Commissioner


Affaires municipales, Régions et Occupation du territoire

Commission municipale du Québec

Régie du logement

Agriculture, Pêcheries et Alimentation

Commission de protection du territoire agricole du Québec

Régie des marchés agricoles et alimentaires du Québec

Conseil du trésor

Commission de la fonction publique

Conseil exécutif

Commission d’accès à l’information

Culture et Communications

Conseil du patrimoine culturel

Développement durable, Environnement, Faune et Parcs

Bureau d’audiences publiques sur l’environnement

Éducation, Loisir et Sport

Commission consultative de l’enseignement privé

Emploi et Solidarité sociale

Commission des partenaires du marché du travail

Conseil du statut de la femme

Enseignement supérieur, Recherche, Science et Technologie

Comité consultatif sur l’accessibilité financière aux études

Commission de l’éthique en science et en technologie

Commission d’évaluation de l’enseignement collégial

Conseil supérieur de l’éducation

Famille


158

APPENDIX 1

National Assembly, appointed persons, government departments and bodies

whose financial transactions were conducted from the general fund of the

Consolidated Revenue Fund (cont'd)

Finances et Économie

Immigration et Communautés culturelles

Commission de toponymie

Conseil supérieur de la langue française

Office québécois de la langue française

Justice

Comité de la rémunération des juges

Comité de la rémunération des procureurs aux poursuites criminelles et pénales

Commission des droits de la personne et des droits de la jeunesse

Conseil de la justice administrative

Conseil de la magistrature

Directeur des poursuites criminelles et pénales

Office de la protection du consommateur

Tribunal des droits de la personne

Relations internationales, Francophonie et Commerce extérieur

Ressources naturelles

Revenu1

Santé et Services sociaux

Commissaire à la santé et au bien-être

Curateur public

Office des personnes handicapées du Québec

Sécurité publique

Bureau des enquêtes indépendantes

Bureau du coroner

Comité de déontologie policière

Commissaire à la déontologie policière

Commissaire à la lutte contre la corruption

Commission québécoise des libérations conditionnelles

Régie des alcools, des courses et des jeux

Transports

Commission des transports du Québec

Travail

Commission de l’équité salariale

(1) Transactions of the general fund of the Consolidated Revenue Fund related to the enforcement or administration of any statute under the responsibility of the Minister of Revenue are administered by the Agence du revenu du Québec.


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159

APPENDIX 2

Government bodies, special funds and sinking funds

Bodies1

Agence du revenu du Québec

Agence métropolitaine de transport (December 31)

Autorité des marchés financiers

Bibliothèque et Archives nationales du Québec

Centre de la francophonie des Amériques

Centre de recherche industrielle du Québec

Centre de services partagés du Québec

Commission de la capitale nationale du Québec

Commission des normes du travail

Commission des services juridiques

Conseil des arts et des lettres du Québec

Conservatoire de musique et d’art dramatique du Québec (June 30)

Corporation d’urgences-santé

École nationale de police du Québec2 (June 30)

École nationale des pompiers du Québec2 (June 30)

Financement-Québec

Fondation de la faune du Québec

Fonds d’aide aux recours collectifs

Fonds de l’assurance médicaments

Fonds de recherche du Québec–Nature et technologies – Québec Research Fund–Nature and Technology

Fonds de recherche du Québec–Santé – Québec Research Fund–Health

Fonds de recherche du Québec–Société et culture – Québec Research Fund–Society and Culture

Héma-Québec

Institut de la statistique du Québec

Institut de tourisme et d’hôtellerie du Québec (June 30)

Institut national d’excellence en santé et en services sociaux

Institut national de santé publique du Québec

Institut national des mines

La Financière agricole du Québec

Musée d’art contemporain de Montréal

Musée de la civilisation

Musée national des beaux-arts du Québec

Office de la sécurité du revenu des chasseurs et piégeurs cris – Cree Hunters and Trappers Income

Security Board (June 30)

Office des professions du Québec

Office Québec-Amériques pour la jeunesse

Office Québec-Monde pour la jeunesse

Régie de l’assurance maladie du Québec

Régie de l’énergie

Régie des installations olympiques (October 31)


160

APPENDIX 2

Government bodies, special funds and sinking funds (cont'd)

Bodies (cont'd)

Régie du bâtiment du Québec

Régie du cinéma

Société d’habitation du Québec

Société de développement de la Baie-James (December 31)

Société de développement des entreprises culturelles

Société de financement des infrastructures locales du Québec

Société de l’assurance automobile du Québec (December 31)

Société de la Place des Arts de Montréal (August 31)

Société de télédiffusion du Québec (Télé-Québec) (August 31)

Société des établissements de plein air du Québec

Société des parcs de sciences naturelles du Québec

Société des traversiers du Québec

Société du Centre des congrès de Québec

Société du Grand Théâtre de Québec (August 31)

Société du Palais des congrès de Montréal

Société du parc industriel et portuaire de Bécancour

Société nationale de l’amiante

Société québécoise d’information juridique

Société québécoise de récupération et de recyclage

Société québécoise des infrastructures

Special funds of the Consolidated Revenue Fund

Access to Justice Fund

Administrative Tribunal of Québec (Fund of the)3

Assistance Fund for Independent Community Action

Bureau de décision et de révision (Fund of the)3

Caregiver Support Fund

Commission des lésions professionnelles (Fund of the)3

Commission des relations du travail (Fund of the)3

Early Childhood Development Fund

Economic Development Fund

Financing Fund

Fonds d’aide aux victimes d’actes criminels

Fonds du centre financier de Montréal

Fonds québécois d’initiatives sociales

Fund for the Promotion of a Healthy Lifestyle


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161

APPENDIX 2

Government bodies, special funds and sinking funds (cont'd)

Special funds of the Consolidated Revenue Fund (cont'd)

Fund to Finance Health and Social Services Institutions

Generations Fund

Goods and Services Fund

Green Fund

Health and Social Services Information Resources Fund

Health Services Fund

Highway Safety Fund

Information Technology Fund of the Ministère de l'Emploi et de la Solidarité sociale

Labour Market Development Fund

Land Transportation Network Fund

Natural Disaster Assistance Fund

Natural Resources Fund Northern Development Fund

Police Services Fund

Québec Cultural Heritage Fund

Regional Development Fund

Register Fund of the Ministère de la Justice

Rolling Stock Management Fund

Sports and Physical Activity Development Fund

Tax Administration Fund

Territorial Information Fund

Tourism Partnership Fund

University Excellence and Performance Fund

Sinking funds of the Consolidated Revenue Fund

Accumulated Sick Leave Fund

Retirement Plans Sinking Fund

Sinking Fund relating to Borrowings by General and Vocational Colleges in Québec

Sinking Fund relating to Borrowings by Québec Health and Social Services Agencies

Sinking Fund relating to Borrowings by Québec School Boards

Sinking Fund relating to Borrowings by Québec University Establishments

Sinking Fund relating to Government Borrowings

Sinking fund set up for and on behalf of municipalities

Survivor’s Pension Plan Fund

(1) When a fiscal year ends on a date other than March 31, the date is indicated in parentheses. Interim data are then used for the period between the end of the fiscal year and March 31.

(2) No data are available for the period between the end of the fiscal year and March 31.

(3) The financial data for this special fund, which were used for consolidation purposes, also include those pertaining to the body financed by this fund.


162

APPENDIX 3

Organizations in the Government’s health and social services

and education networks

Health and social services network

Agencies and other regional authorities

Agence de la santé et des services sociaux de Chaudière-Appalaches

Agence de la santé et des services sociaux de l'Abitibi-Témiscamingue

Agence de la santé et des services sociaux de l'Estrie

Agence de la santé et des services sociaux de l'Outaouais

Agence de la santé et des services sociaux de la Capitale-Nationale

Agence de la santé et des services sociaux de la Côte-Nord

Agence de la santé et des services sociaux de la Gaspésie–Îles-de-la-Madeleine

Agence de la santé et des services sociaux de la Mauricie et du Centre-du-Québec

Agence de la santé et des services sociaux de la Montérégie

Agence de la santé et des services sociaux de Lanaudière

Agence de la santé et des services sociaux de Laval

Agence de la santé et des services sociaux de Montréal

Agence de la santé et des services sociaux des Laurentides

Agence de la santé et des services sociaux du Bas-Saint-Laurent

Agence de la santé et des services sociaux du Saguenay–Lac-Saint-Jean

Régie régionale de la santé et des services sociaux du Nunavik – Nunavik Regional Board of Health

Social Networks

Public institutions

Centre de protection et de réadaptation de la Côte-Nord

Centre de réadaptation Constance-Lethbridge – Constance Lethbridge Rehabilitation Centre

Centre de réadaptation de l'Ouest de Montréal – West Montreal Readaptation Centre

Centre de réadaptation de la Gaspésie (Le)

Centre de réadaptation en déficience intellectuelle de Québec

Centre de réadaptation en déficience intellectuelle et en troubles envahissants du développement

de Chaudière-Appalaches


de l’Estrie


de la Mauricie et du Centre-du-Québec – Institut universitaire


de la Montérégie-Est


de Laval


de Montréal


du Bas-Saint-Laurent


2 0 1 3 - 2 0 14

163

APPENDIX 3


and education networks (cont’d)

Health and social services network (cont’d)

Public institutions (cont’d)


du Saguenay–Lac-Saint-Jean

Centre de réadaptation en déficience physique Chaudière-Appalaches

Centre de réadaptation en déficience physique Le Bouclier

Centre de réadaptation en dépendance de Chaudière-Appalaches

Centre de réadaptation en dépendance de l’Estrie

Centre de réadaptation en dépendance de l’Outaouais

Centre de réadaptation en dépendance de Montréal

Centre de réadaptation en dépendance de Québec

Centre de réadaptation en dépendance des Laurentides

Centre de réadaptation en dépendance Domrémy de la Mauricie–Centre-du-Québec

Centre de réadaptation en dépendance Le Virage

Centre de réadaptation Estrie inc.

Centre de réadaptation Foster

Centre de réadaptation Interval

Centre de réadaptation La Maison

Centre de réadaptation La Myriade

Centre de santé et de services sociaux Alphonse-Desjardins

Centre de santé et de services sociaux Cavendish

Centre de santé et de services sociaux Champlain–Charles-Le Moyne

Centre de santé et de services sociaux Cléophas-Claveau

Centre de santé et de services sociaux d'Ahuntsic et Montréal-Nord

Centre de santé et de services sociaux d'Antoine-Labelle

Centre de santé et de services sociaux d'Argenteuil

Centre de santé et de services sociaux d'Arthabaska-et-de-l'Érable

Centre de santé et de services sociaux de Beauce

Centre de santé et de services sociaux de Bécancour–Nicolet-Yamaska

Centre de santé et de services sociaux de Bordeaux-CartiervilleSaint-Laurent

Centre de santé et de services sociaux de Charlevoix

Centre de santé et de services sociaux de Chicoutimi

Centre de santé et de services sociaux de Dorval-Lachine-Lasalle

Centre de santé et de services sociaux de Gatineau

Centre de santé et de services sociaux de Jonquière

Centre de santé et de services sociaux de Kamouraska

Centre de santé et de services sociaux de l'Énergie

Centre de santé et de services sociaux de l'Hématite

Centre de santé et de services sociaux de l'Ouest-de-l'Île

Centre de santé et de services sociaux de la Baie-des-Chaleurs


164

APPENDIX 3





Centre de santé et de services sociaux de la Basse-Côte-Nord

Centre de santé et de services sociaux de la Côte-de-Gaspé

Centre de santé et de services sociaux de la Haute-Côte-Nord–Manicouagan

Centre de santé et de services sociaux de la Haute-Gaspésie

Centre de santé et de services sociaux de la Haute-Yamaska

Centre de santé et de services sociaux de la Matapédia

Centre de santé et de services sociaux de la Minganie

Centre de santé et de services sociaux de la Mitis

Centre de santé et de services sociaux de la Montagne

Centre de santé et de services sociaux de la MRC-de-Coaticook

Centre de santé et de services sociaux de la Pointe-de-l'Île

Centre de santé et de services sociaux de la région de Thetford

Centre de santé et de services sociaux de la Vallée-de-l'Or

Centre de santé et de services sociaux de la Vallée-de-la-Batiscan

Centre de santé et de services sociaux de la Vallée-de-la-Gatineau

Centre de santé et de services sociaux de la Vieille-Capitale

Centre de santé et de services sociaux de Lac-Saint-Jean-Est

Centre de santé et de services sociaux de Laval

Centre de santé et de services sociaux de Maskinongé

Centre de santé et de services sociaux de Matane

Centre de santé et de services sociaux de Memphrémagog

Centre de santé et de services sociaux de Montmagny-L'Islet

Centre de santé et de services sociaux de Papineau

Centre de santé et de services sociaux de Port-Cartier

Centre de santé et de services sociaux de Portneuf

Centre de santé et de services sociaux de Québec-Nord

Centre de santé et de services sociaux de Rimouski-Neigette

Centre de santé et de services sociaux de Rivière-du-Loup

Centre de santé et de services sociaux de Rouyn-Noranda

Centre de santé et de services sociaux de Saint-Jérôme

Centre de santé et de services sociaux de Saint-Léonard et Saint-Michel

Centre de santé et de services sociaux de Sept-Îles

Centre de santé et de services sociaux de Témiscouata

Centre de santé et de services sociaux de Thérèse-De Blainville

Centre de santé et de services sociaux de Trois-Rivières

Centre de santé et de services sociaux de Vaudreuil-Soulanges

Centre de santé et de services sociaux des Aurores-Boréales

Centre de santé et de services sociaux des Basques


2 0 1 3 - 2 0 14

165

APPENDIX 3





Centre de santé et de services sociaux des Collines

Centre de santé et de services sociaux des Etchemins

Centre de santé et de services sociaux des ÎIes

Centre de santé et de services sociaux des Pays-d'en-Haut

Centre de santé et de services sociaux des Sommets

Centre de santé et de services sociaux des Sources

Centre de santé et de services sociaux Domaine-du-Roy

Centre de santé et de services sociaux Drummond

Centre de santé et de services sociaux du Coeur-de-l'Île

Centre de santé et de services sociaux du Granit

Centre de santé et de services sociaux du Haut-Saint-François

Centre de santé et de services sociaux du Haut-Saint-Laurent

Centre de santé et de services sociaux du Haut-Saint-Maurice

Centre de santé et de services sociaux du Lac-des-Deux-Montagnes

Centre de santé et de services sociaux du Nord de Lanaudière

Centre de santé et de services sociaux du Pontiac

Centre de santé et de services sociaux du Rocher-Percé

Centre de santé et de services sociaux du Sud de Lanaudière

Centre de santé et de services sociaux du Sud-OuestVerdun

Centre de santé et de services sociaux du Suroît

Centre de santé et de services sociaux du Témiscamingue

Centre de santé et de services sociaux du Val-Saint-François

Centre de santé et de services sociaux Haut-RichelieuRouville

Centre de santé et de services sociaux – Institut universitaire de gériatrie de Sherbrooke

Centre de santé et de services sociaux Jardins-Roussillon

Centre de santé et de services sociaux Jeanne-Mance

Centre de santé et de services sociaux La Pommeraie

Centre de santé et de services sociaux Les Eskers de l'Abitibi

Centre de santé et de services sociaux Lucille-Teasdale

Centre de santé et de services sociaux Maria-Chapdelaine

Centre de santé et de services sociaux Pierre-Boucher

Centre de santé et de services sociaux Pierre-De Saurel

Centre de santé et de services sociaux Richelieu-Yamaska

Centre de santé Inuulitsivik – Inuulitsivik Health Centre

Centre de santé Tulattavik de l'Ungava – Ungava Tulattavik Health Center

Centre de soins prolongés Grace Dart – Grace Dart Extended Care Centre

Centre du Florès

Centre hospitalier de l'Université de Montréal


166

APPENDIX 3





Centre hospitalier de St. Mary – St. Mary’s Hospital Centre

Centre hospitalier universitaire de Sherbrooke

Centre hospitalier universitaire Sainte-Justine

Centre jeunesse Chaudière-Appalaches

Centre jeunesse de l'Abitibi-Témiscamingue (CJAT)

Centre jeunesse de l'Estrie

Centre jeunesse de la Mauricie et du Centre-du-Québec (Le)

Centre jeunesse de la Montérégie

Centre jeunesse de Laval

Centre jeunesse de Montréal (Le)

Centre jeunesse de Québec

Centre jeunesse des Laurentides

Centre jeunesse du Bas-Saint-Laurent

Centre jeunesse du Saguenay–Lac-Saint-Jean (Le)

Centre jeunesse Gaspésie–Les Îles

Centre Miriam – Miriam Home and Services

Centre montérégien de réadaptation

Centre Normand

Centre régional de réadaptation La Ressourse

Centre régional de santé et de services sociaux de la Baie-James1

Centre universitaire de santé McGill – McGill University Health Centre

Centres de la jeunesse et de la famille Batshaw (Les) – Batshaw Youth and Family Centres

Centres jeunesse de Lanaudière (Les)

Centres jeunesse de l'Outaouais (Les)

CHSLD juif de Montréal – Jewish Eldercare Centre

CHU de Québec

Clair Foyer inc.

CLSC Naskapi

Conseil cri de la santé et des services sociaux de la Baie-James – Cree Board of Health and Social

Services of James Bay1

Corporation du Centre de réadaptation Lucie-Bruneau (La)

Corporation du Centre hospitalier gériatrique Maimonides (La) – Maimonides Geriatric Centre

Hôpital chinois de Montréal (1963) (L') – Montreal Chinese Hospital (1963)

Hôpital du Sacré-Coeur de Montréal

Hôpital général juif Sir Mortimer B. Davis (L') – Sir Mortimer B. Davis Jewish General Hospital

Hôpital Jeffery Hale Saint Brigid's

Hôpital juif de réadaptation – Jewish Rehabilitation Hospital

Hôpital Maisonneuve-Rosemont

Hôpital Mont-Sinaï – Mount Sinai Hospital


2 0 1 3 - 2 0 14

167

APPENDIX 3





Hôpital Rivière-des-Prairies

Hôpital Santa Cabrini

Institut canadien-polonais du bien-être inc.

Institut de cardiologie de Montréal – Montréal Heart Institute

Institut de réadaptation en déficience physique de Québec

Institut de réadaptation Gingras-Lindsay-de-Montréal

Institut Nazareth et Louis-Braille

Institut Philippe-Pinel de Montréal

Institut Raymond-Dewar

Institut universitaire de cardiologie et de pneumologie de Québec

Institut universitaire de gériatrie de Montréal

Institut universitaire en santé mentale de Montréal

Institut universitaire en santé mentale de Québec

Institut universitaire en santé mentale Douglas – Douglas Mental Health University Institute

La Résidence de Lachute – Lachute Residence

Pavillon du Parc

Services de réadaptation du Sud-Ouest et du Renfort (Les)

Education networks

School boards2

Commission scolaire au Coeur-des-Vallées

Commission scolaire Central Québec – Central Québec School Board

Commission scolaire crie – Cree School Board

Commission scolaire de Charlevoix

Commission scolaire de Kamouraska–Rivière-du-Loup

Commission scolaire de l'Estuaire

Commission scolaire de l'Énergie

Commission scolaire de l'Or-et-des-Bois

Commission scolaire de la Baie-James

Commission scolaire de la Beauce-Etchemin

Commission scolaire de la Capitale

Commission scolaire de la Côte-du-Sud

Commission scolaire De La Jonquière

Commission scolaire de la Moyenne-Côte-Nord

Commission scolaire de la Pointe-de-l'Île


168

APPENDIX 3



Education networks (cont’d)

School boards (cont’d)

Commission scolaire de la Région-de-Sherbrooke

Commission scolaire de la Riveraine

Commission scolaire de la Rivière-du-Nord

Commission scolaire de la Seigneurie-des-Mille-Îles

Commission scolaire de la Vallée-des-Tisserands

Commission scolaire de Laval

Commission scolaire de Montréal

Commission scolaire de Portneuf

Commission scolaire de Rouyn-Noranda

Commission scolaire de Saint-Hyacinthe

Commission scolaire de Sorel-Tracy

Commission scolaire des Affluents

Commission scolaire des Appalaches

Commission scolaire des Bois-Francs

Commission scolaire des Chênes

Commission scolaire des Chic-Chocs

Commission scolaire des Découvreurs

Commission scolaire des Draveurs

Commission scolaire des Grandes-Seigneuries

Commission scolaire des Hautes-Rivières

Commission scolaire des Hauts-Bois-de-l'Outaouais

Commission scolaire des Hauts-Cantons

Commission scolaire des Îles

Commission scolaire des Laurentides

Commission scolaire des Monts-et-Marées

Commission scolaire des Navigateurs

Commission scolaire des Patriotes

Commission scolaire des Phares

Commission scolaire des Portages-de-l'Outaouais

Commission scolaire des Premières-Seigneuries

Commission scolaire des Rives-du-Saguenay

Commission scolaire des Samares

Commission scolaire des Sommets

Commission scolaire des Trois-Lacs

Commission scolaire du Chemin-du-Roy

Commission scolaire du Fer

Commission scolaire du Fleuve-et-des-Lacs

Commission scolaire du Lac-Abitibi


2 0 1 3 - 2 0 14

169

APPENDIX 3




School boards (cont’d)

Commission scolaire du Lac-Saint-Jean

Commission scolaire du Lac-Témiscamingue

Commission scolaire du Littoral

Commission scolaire du Pays-des-Bleuets

Commission scolaire du Val-des-Cerfs

Commission scolaire Eastern Shores – Eastern Shores School Board

Commission scolaire Eastern Townships – Eastern Townships School Board

Commission scolaire English-Montréal – English Montreal School Board

Commission scolaire Harricana

Commission scolaire Kativik – Kativik School Board

Commission scolaire Lester-B.-Pearson – Lester B. Pearson School Board

Commission scolaire Marguerite-Bourgeoys

Commission scolaire Marie-Victorin

Commission scolaire New Frontiers – New Frontiers School Board

Commission scolaire Pierre-Neveu

Commission scolaire René-Lévesque

Commission scolaire Riverside – Riverside School Board

Commission scolaire Sir-Wilfrid-Laurier – Sir Wilfrid Laurier School Board

Commission scolaire Western Québec – Western Québec School Board

Comité de gestion de la taxe scolaire de l'île de Montréal

General and vocational colleges (CEGEPs)2

Cégep André-Laurendeau

Cégep Beauce-Appalaches

Cégep d'Ahuntsic

Cégep de Baie-Comeau

Cégep de Bois-de-Boulogne

Cégep de Chicoutimi

Cégep de Drummondville

Cégep de Granby–Haute-Yamaska

Cégep de Jonquière

Cégep de l'Abitibi-Témiscamingue

Cégep de l'Outaouais

Cégep de la Gaspésie et des Îles

Cégep de La Pocatière

Cégep de Lévis-Lauzon

Cégep de Maisonneuve


170

APPENDIX 3




General and vocational colleges (CEGEPs) (cont’d)

Cégep de Matane

Cégep de Rimouski

Cégep de Rivière-du-Loup

Cégep de Rosemont

Cégep de Saint-Félicien

Cégep de Saint-Hyacinthe

Cégep de Saint-Jérôme

Cégep de Saint-Laurent

Cégep de Sainte-Foy

Cégep de Sept-Îles

Cégep de Sherbrooke

Cégep de Sorel-Tracy

Cégep de Thetford

Cégep de Trois-Rivières

Cégep de Valleyfield

Cégep de Victoriaville

Cégep du Vieux Montréal

Cégep Édouard-Montpetit

Cégep François-Xavier-Garneau

Cégep Gérald-Godin

Cégep Limoilou

Cégep Lionel-Groulx

Cégep Marie-Victorin

Cégep Montmorency

Cégep régional de Lanaudière

Cégep Saint-Jean-sur-Richelieu

Champlain Regional College of General and Vocational Education

Collège d’Alma

Collège Shawinigan

Dawson College

Heritage College

John Abbott College

Vanier College of General and Vocational Education


2 0 1 3 - 2 0 14

171

APPENDIX 3




Université du Québec and its constituent universities3

École de technologie supérieure

École nationale d'administration publique

Institut national de la recherche scientifique

Télé-université

Université du Québec

Université du Québec à Chicoutimi

Université du Québec à Montréal

Université du Québec à Rimouski

Université du Québec à Trois-Rivières

Université du Québec en Abitibi-Témiscamingue

Université du Québec en Outaouais

(1) These entities act as agencies and public institutions.

(2) School boards and colleges have a fiscal year that ends on June 30. Interim data are used for the period between the end of their fiscal year and March 31.

(3) The financial data of the Université du Québec and its constituent universities that were used for consolidation purposes cover the period from May 1, 2013 to April 30, 2014, the date on which their fiscal year ends. Operations and events relating to these entities that occurred between April 1 and 30, 2014 did not have a material financial impact on the Government’s financial position and consolidated results.


172

APPENDIX 4


Capital Financière agricole inc.

Hydro-Québec (December 31)

Investissement Québec

Loto-Québec

Société des alcools du Québec (fiscal year ended on the last Saturday of the month of March)

Société Innovatech du Grand Montréal

Société Innovatech du Sud du Québec

Société Innovatech Québec et Chaudière-Appalaches

Société Innovatech Régions ressources

Note: When the fiscal year of an enterprise ends on a date other than March 31, the date is indicated in parentheses. Interim data are then used for the period between the end of the enterprise’s fiscal year and March 31.


2 0 1 3 - 2 0 14

173

APPENDIX 5

Government departments and bodies that conduct fiduciary

transactions not included in the Government's reporting entity


Fonds des pensions alimentaires

Unclaimed property (December 31)


Fonds d’indemnisation des services financiers

Caisse de dépôt et placement du Québec (December 31)

Comité Entraide – public and parapublic sectors (December 31)

Commission administrative des régimes de retraite et d’assurances (December 31)

Commission de la construction du Québec (December 31)


Workforce Skills Development and Recognition Fund

Conseil de gestion de l’assurance parentale (December 31)

Parental Insurance Fund (December 31)

Curateur public

Accounts under administration (December 31)


Fonds d’assurance-récolte

Fonds d’assurance-stabilisation des revenus agricoles

Ministère de la Sécurité publique

Fonds central de soutien à la réinsertion sociale (December 31)

Ministère des Finances et de l’Économie

Trust fund


Cautionnements individuels des agents de voyages

Fonds d’indemnisation des clients des agents de voyages


Fonds d’assurance-garantie

Régie des rentes du Québec (December 31)


Guarantee fund

Société de l’assurance automobile du Québec

Fonds d’assurance automobile du Québec (December 31)


Compensation regime for municipal bodies

Note: When a fiscal year ends on a date other than March 31, the date is indicated in parentheses.


174

APPENDIX 6

Revenue

FISCAL YEAR ENDED MARCH 31, 2014

Revenue by source (in millions of dollars)

2013

Budget (1) Actual results Actual results

Income and property taxes

Personal income tax 26 203 25 070

Contributions dedicated to health services 6 251 6 391

Corporate tax 5 625 6 034

School property tax 1 786 1 577

41 711 39 865 39 072

Consumption taxes

Sales 13 262 12 542

Fuel 2 310 2 150

Tobacco 1 010 907

Alcoholic beverages 551 480

Pari mutuel 2 0

18 123 17 135 16 079

Duties and permits

Motor vehicles 1 137 1 092

Natural resources 505 460

Other 556 532

2 215 2 198 2 084

Miscellaneous revenue

Sales of goods and services 4 655 4 516

User contributions 1 526 1 506

Tuition fees 303 282

Interest 757 875

Fines, forfeitures and recoveries 874 803

Third-party donations 817 912

8 835 8 932 8 894

Revenue from government enterprises

Hydro-Québec 3 333 919

Loto-Québec 1 055 1 194

Société des alcools du Québec 1 003 1 030

Other 39 895 108 5 430 3 232

Generations Fund revenue 1 039 1 121 961

Total own-source revenue 77 031 74 681 70 322


Equalization 7 833 7 391

Protection payment 362

Health transfers 5 290 4 792Transfers for post-secondary education and

other social programs 1 534 1 486

Compensation for harmonisation of the QST with the GST 1 467 733

Other programs 2 426 2 753

Total federal government transfers 18 161 18 550 17 517

Total revenue 95 192 93 231 87 839

2014



2 0 1 3 - 2 0 14

175

APPENDIX 7

Expenditure

FISCAL YEAR ENDED MARCH 31, 2014

Expenditure by supercategory and category (in millions of dollars)

2013

Budget(1)

Actual results Actual results

Transfers


Operating 1 185 1 235

Capital 1 819 1 775

Interest 357 356

Support 19 963 19 496

26 038 25 360


Operating(2)

17 160 16 466

Doubtful accounts and other allowances 843 841

Sub-total 82 884 84 336 80 515

Debt service

Interest on debt(3)

7 589 7 238

Less

Investment income of the sinking funds

for borrowings 297 405

Short-term investment income 73 78

7 219 6 755

Interest on pension plan and other employee future

benefit obligations 5 608 5 285

Less

Investment income of the Retirement Plans Sinking Fund

and specific pension funds 2 157 2 131

Investment income of employee future benefit

program funds 72 70

3 379 3 084

Debt service 10 869 10 598 9 839

Total expenditure 93 753 94 934 90 354

2014


(2) The operating expenditure included an amount of $3 460 M ($3 269 M in 2012-2013) related to the depreciation of fixed assets.

(3) The interest charge on the debt included an amount of $18 M related to the amortization of deferred foreign exchange gains ($9 M in 2012-2013).


176

APPENDIX 8

Investment in government enterprises AS AT MARCH 31, 2014

Financial information on government enterprises (in millions of dollars)

Investissement

Québec Loto-Québec

December 31

2013

Adjustments for

the

three-month period(1)

March 31

STATEMENT OF OPERATIONS

Revenue 12 881 711 13 592 823 3 514

Expenditure 9 943 317 10 260 785 2 370

Operating result 2 938 394 3 332 38 1 144

Result from discontinued

operations(2)

4 9 13 0 0

Net result 2 942 403 3 345 38 1 144

Consolidation adjustments(3)

(12) 0 (89)

REVENUE FROM

GOVERNMENT ENTERPRISES 3 333 38 1 055

OTHER COMPREHENSIVE INCOME

ITEMS(4)

(323) 135 (188) 107 2

STATEMENT OF FINANCIAL POSITION

Assets

Fixed assets 61 400 143 61 543 234 1 028

Other assets 11 710 (489) 11 221 7 989 322

Total assets 73 110 (346) 72 764 8 223 1 350

Liabilities

Long-term debts 44 477 (631) 43 846(5)

4 565(6)

433(7)

Other liabilities 9 239 (1 487) 7 752(8)

979(7)

835

Total liabilities 53 716 (2 118) 51 598 5 544 1 268

Shareholders' equity

Cumulative total of other comprehensive

income items (548) 9 (539) 244 (4)

Other shareholders' equity items 19 942 1 763 21 705 2 435 86

Total shareholders' equity 19 394 1 772 21 166 2 679 82

Consolidation adjustments(9)

(6) 21 0

Equity value 21 160 2 700 82

Loans(10)

21 160 481 433

INVESTMENT IN

GOVERNMENT ENTERPRISES 21 160 3 181 515

Hydro-Québec

2014


2 0 1 3 - 2 0 14

177

APPENDIX 8

2013

(restated)

Société des

alcools du

Québec

Capital

Financière

agricole inc.(11)

Société

Innovatech du

Grand

Montréal

Société

Innovatech du

Sud du Québec

Société

Innovatech

Québec et

Chaudière-

Appalaches

Société

Innovatech

Régions

ressources Total Total

2 986 1 0 0 0 0 20 916 19 902

1 983 1 0 0 0 0 15 399 14 732

1 003 ─ ─ ─ ─ ─ 5 517 5 170

0 0 0 0 0 0 13 (1 876)

1 003 ─ ─ ─ ─ ─ 5 530 3 294

0 0 0 0 0 1 (100) (62)

1 003 ─ ─ ─ ─ 1 5 430 3 232

(1) ─ ─ ─ ─ ─ (80) (360)

260 0 0 0 0 0 63 065 61 090

384 18 5 13 29 25 20 006 18 973

644 18 5 13 29 25 83 071 80 063

0 5(7)

0 0 0 0 48 849 47 359

601 0 0 0 0 10 167 9 746

601 5 ─ ─ ─ ─ 59 016 57 105

0

(3) 0 0 0 0 0 (302) (221)

46 13 5 13 29 25 24 357 23 179

43 13 5 13 29 25 24 055 22 958

0 (1) 0 0 0 0 14 26

43 12 5 13 29 25 24 069 22 984

0 5 0 0 0 0 919 754

43 17 5 13 29 25 24 988 23 738

2014


178

APPENDIX 8

Investment in government enterprises (cont’d)


(1) The data presented in the “Adjustments for the three-month period” column represent adjustments needed to account for the Hydro-Québec data on the basis of the Government’s fiscal year, which ends on March 31. The fiscal year of Hydro-Québec ends on December 31.

(2) The result from discontinued operations stems from the closure of the Gentilly-2 nuclear generating station. This reduced Hydro-Québec’s operating results by $59 M for fiscal 2012-2013. In addition, the abandonment of the refurbishment project led to the write-off by Hydro-Québec of the tangible fixed assets under construction for the project worth $990 M. The enterprise also had to depreciate all of its assets related to nuclear operations by $827 M, in order to reduce the book value of these assets to zero.

(3) The adjustment of the government enterprises’ net results stems mainly from contributions made by Loto-Québec to entities within the Government’s reporting entity (decrease of $89 M) and charged to its shareholders’ equity and from the elimination of unrealized gains and losses on transactions carried out by Hydro-Québec with entities in the Government's reporting entity (decrease of $12 M).

(4) The enterprises’ other comprehensive income items arise mainly from variations in the fair value of instruments designated as cash flow hedges and in those of financial assets available for sale, as well as from foreign exchange gains and losses stemming from the translation of subsidiaries and of equity-accounted entities. These other comprehensive income items will be reclassified to the government enterprises’ net results when they are realized.

In the case of Hydro-Québec, other comprehensive income items were mainly the result of a downward variation of $188 M in the fair value of instruments designated as cash flow hedges; in the case of Investissement Québec, they stemmed primarily from upward variations of $68 M in the fair value of financial assets available for sale and from a foreign exchange gain of $38 M resulting from the conversion of a subsidiary and of equity-accounted entities.

(5) The Government guarantees borrowings contracted by Hydro-Québec in different currencies. The net value of these borrowings stood at $42 000 M as at March 31, 2014 ($39 800 M as at March 31, 2013).

(6) The Government guarantees payment of the principal on certain debts, which totalled $4 564 M as at March 31, 2014 ($4 001 M as at March 31, 2013).

(7) The loans granted by the Government to enterprises are presented, as the case may be, in the long-term debts or other liabilities of the enterprise concerned. The general conditions of the loans are described in detail in Note 10 below.

(8) The Government granted a financial guarantee of $685 M ($685 M as at March 31, 2013) for the Gentilly-2 nuclear generating station, for which Hydro-Québec set up a trust of $106 M ($94 M as at March 31, 2013).

(9) The equity value adjustments stem from the elimination of unrealized gains and losses on transactions with entities in the Government's reporting entity.

(10) The loans granted by the Government to Investissement Québec totalling $481 M do not bear interest and are repayable on demand; the loans to Loto-Québec bear interest at rates of 1.95% to 4.12% and mature between May 2014 and December 2043; and the loans to Capital Financière agricole inc. bore interest at rates of 0% to 1.33% and matured in April and May 2014.

The value of the maturing loans will be $104 M in 2015, $75 M in 2016, $50 M in 2017, $40 M in 2018, $50 M in 2019, $68 M during the 2020-2024 period and $50 M beyond that period.

(11) The percentage of the Government’s investment in this enterprise is 90.10%.


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179

APPENDIX 8

Investment in government enterprises (cont'd)


Repayment schedule for long-term debts contracted with third parties other than the Government (in millions of dollars)

2015 2016 2017 2018 2019

2020 and

thereafter Total

Hydro-Québec 2 335 112 1 694 1 106 1 195 37 404 43 846

Investissement Québec 839 807 825 1 080 1 014 0 4 565

3 174 919 2 519 2 186 2 209 37 404 48 411


180

APPENDIX 8



Restatements by government enterprises

Adoption of revised IAS 19 standard Employee Benefits

For their 2013-2014 fiscal year, Loto-Québec and the Société des alcools du Québec complied with the

new requirements of IAS 19 Employee Benefits, of the International Financial Reporting Standards

(IFRS), in effect for fiscal years beginning on or after January 1, 2013. The accounting changes resulting

from these new requirements concern the accounting treatment of the actuarial gains or losses of the

enterprises’ pension plans and other employee future benefit programs. These gains and losses are now

recognized immediately in the other items of their comprehensive income instead of in their net results

using the corridor approach. These changes were applied retroactively by these enterprises, with

restatement of their previous fiscal year.

These accounting changes led to a decrease, as at April 1, 2013, of $1 million in the shareholders’ equity

of the Société des alcools du Québec and of $10 million in that of Loto-Québec; these decreases changed

primarily the accumulated comprehensive income of these enterprises. The changes did not have a

material impact on the net income of these enterprises for 2012-2013 and 2013-2014.

The Government therefore reduced, as at April 1, 2012, the value of its investment in these two

enterprises by $11 million, with restatement of its statement of consolidated financial position for the

previous year. However, since the impact on the consolidated results for fiscal 2012-2013 was immaterial,

the revenue from these two government enterprises was not restated.

Total impact (in millions of dollars)

2014 2013

Investment in government enterprises (11) (11)

Accumulated deficit and net debt, beginning of year 11 11

Accumulated deficit and net debt, end of year 11 11


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181

APPENDIX 8



Main contractual obligations of government enterprises

Hydro-Québec

Hydro-Québec has made a commitment to Churchill Falls (Labrador) Corporation Limited to buy almost

all of the power produced by the Churchill Falls generating station, which has a rated capacity

of 5 428 megawatts. This contract, which expires in 2016, will be renewed automatically for a

further 25 years, according to the terms and conditions already agreed upon. A contract guaranteeing the

availability of 682 megawatts of additional power until 2041 for the November 1 to March 31 winter

period has also been concluded with this enterprise.

As at December 31, 2013, Hydro-Québec was also committed under 129 contracts to purchasing

electricity from other producers, for a capacity of roughly 5 494 megawatts. Most of the contracts, which

extend to 2052, include renewal clauses.

Taking into account electricity purchase contracts as a whole, Hydro-Québec plans to make the following

minimum payments, in millions of dollars, in the coming fiscal years:

December 31

2014 1 421

2015 1 606

2016 1 738

2017 1 754

2018 1 778

2019 and thereafter 30 522

Total 38 819

Hydro-Québec has provided for investments of about $4 billion in tangible fixed assets and intangible

assets for the 2014 calendar year. The enterprise’s commitments arising from these investment projects

totalled the same amount as at March 31, 2014.

In addition, the enterprise’s commitments under various agreements with local communities affected by

certain tangible fixed asset investment projects amounted to $618 million as at December 31, 2013; these

agreements provide for annual payments as of 2021, for a maximum of 51 years.


182

APPENDIX 8



Main contractual obligations of government enterprises (cont’d)


Investissement Québec has contracted various financing and investment commitments during the normal

course of its activities. The financing agreements, authorized by the enterprise, pending acceptance by

clients, represented a total of $33 million as at March 31, 2014. The agreements accepted by clients,

which include amounts not disbursed on loans, shares and units, amounts for which disbursement has not

been authorized for financial contributions and amounts that have not yet been used for guarantees,

represented a total of $485 million at that date. In addition, under agreements with partners,

Investissement Québec was committed as at March 31, 2014 to investing $137 million, through units of

limited partnerships, in regional economic intervention funds (FIER) and other venture capital agencies.

These commitments do not necessarily represent future cash requirements of Investissement Québec, as

several will expire or may be cancelled without resulting in an outflow of cash.

Investissement Québec has contracted various other commitments during the normal course of its

activities. These commitments, totalling $87 million, are authorized commitments that had not been

disbursed as at March 31, 2014.

Loto-Québec

As at March 31, 2014, Loto-Québec was committed, under lease agreements, to paying undiscounted

minimum payments due, totalling $162 million.

Société des alcools du Québec

As at March 31, 2014, the Société des alcools du Québec was committed, under lease agreements, to

paying undiscounted minimum payments due, totalling $380 million, for the rental of outlets.


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183

APPENDIX 8



Main contingencies of government enterprises

Hydro-Québec

In accordance with the terms and conditions for the issue of certain debt securities outside Canada,

Hydro-Québec has undertaken to increase the interest paid to non-residents if changes are made to

Canadian tax legislation concerning tax on the income of non-resident persons. The enterprise is unable to

estimate the maximum amount it could be required to pay. If such an amount becomes payable,

Hydro-Québec would have the option of repaying most of the securities in question. As at

December 31, 2013, the amortized cost of the debt concerned was $5 604 million.


When a corporation is sold in whole or in part, in addition to any potential indemnification arising from

the failure to execute restrictive clauses or from non-compliance with a declaration of guarantee,

Investissement Québec may agree to give a guarantee against any claim resulting from past activities. In

general, the terms and conditions and amount of such indemnification are limited to the agreement.

Investissement Québec did not recognize an amount on its consolidated statement of financial position for

these sales because it is not probable that an outflow of resources will be required to settle the obligation

and such an amount cannot be reliably estimated.

To contribute to Québec’s economic development, Investissement Québec guarantees borrowings and

other financial commitments contracted by corporations. As at March 31, 2014, the guarantees granted by

this enterprise totalled $486 million; a liability of $111 million has been recorded in respect of these

guarantees.


184

APPENDIX 8



Material transactions and balances of government enterprises realized with entities included in the Government's reporting entity (in millions of dollars)

2014 2013

Inter-entity transactions related to results

Revenue 681 578

Expenditure 1 440 1 405

0Inter-entity transactions related to shareholder's equity 0 0

Dividends

Hydro-Québec 2 207 645

Loto-Québec 1 055 1 194

Société des alcools du Québec 1 003 1 030

Contributions from Loto-Québec 89 88

Inter-entity balances 0 0

Financial assets 5 078 4 515

Non-financial assets 108 124

Deferred revenue related to the acquisition of fixed assets 55 57

Debts and other liabilities with the Government 1 279 1 338


2 0 1 3 - 2 0 14

185

APPENDIX 9

Segment disclosures


Consolidated statement of revenue and consolidated statement of expenditure by

government mission

To supplement the consolidated financial statements, the Government provides segmented financial

information for each of its main missions. This information is intended to present the resources allocated

to support its main missions, and to provide users with relevant information for accountability and

decision-making purposes.

The following tables present the revenue sources and costs of each of the Government’s main missions,

namely:

Health and Social Services: encompasses the activities of the Ministère de la Santé et des Services

sociaux and the bodies and special funds that contribute to this mission;

Education and Culture: encompasses the activities of the Ministère de l’Éducation, du Loisir et du

Sport, the Ministère de l’Enseignement supérieur, de la Recherche, de la Science et de la

Technologie (higher education sector), the Ministère de la Culture et des Communications, the

Ministère de l’Immigration et des Communautés culturelles and the bodies and special funds that

contribute to this mission;

Economy and Environment: encompasses mainly the activities of the Ministère des Affaires

municipales, des Régions et de l’Occupation du territoire, the Ministère des Transports, the Ministère

de l’Agriculture, des Pêcheries et de l’Alimentation, the Ministère des Finances et de l’Économie

(economic development sector), the Ministère des Ressources naturelles, the Ministère du

Développement durable, de l’Environnement, de la Faune et des Parcs, the Ministère des Relations

internationales, de la Francophonie et du Commerce extérieur, the Ministère de l'Enseignement

supérieur, de la Recherche, de la Science et de la Technologie (research, science and technology

sector) and the bodies and special funds that contribute to this mission;

Support for Individuals and Families: encompasses mainly the activities of the Ministère de

l’Emploi et de la Solidarité sociale, the Ministère de la Famille, the Ministère de la Justice (access to

justice sector) and the bodies and special funds that contribute to this mission;


186

APPENDIX 9

Segment disclosures (cont’d)


Consolidated statement of revenue and consolidated statement of expenditure by

government mission (cont'd)

Administration and Justice: encompasses mainly the activities of the Ministère des Affaires

municipales, des Régions et de l’Occupation du territoire (sector related to financial assistance to

municipalities and compensations in lieu of taxes), the Ministère de la Sécurité publique, the

Ministère du Conseil exécutif, the Conseil du trésor et de l’Administration gouvernementale, the

Ministère de la Justice, the Ministère des Finances et de l’Économie (sector related to finance, except

for debt management), the Ministère du Travail, the National Assembly and persons appointed by it

and the bodies and special funds that contribute to this mission. In addition, revenue and expenditure

related to the application or enforcement of any Act, which are under the responsibility of the

Minister of Revenue, are presented in this mission, except for refundable tax credits that meet the

definition of a tax-funded transfer. Each of these tax credits is presented in the expenditures of the

Government mission with which it is associated. Revenue from federal government transfers falling

under the responsibility of the Ministère des Finances et de l’Économie, i.e. revenue from

equalization payments, payments from transfers for health care and for post-secondary education and

other social programs, are also presented in this mission.

Debt Service: encompasses activities of the Ministère des Finances et de l’Économie (debt

management sector).

The revenue and expenditure of each mission are presented after the eliminations of transactions and

balances between the entities in a given mission. In addition, when an entity’s activities are related to

several missions, its revenue and expenditure are allocated among the missions concerned.


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187

APPENDIX 9



Consolidated statement of revenue by government mission (in millions of dollars)

Health and

Social

Services

Education

and Culture

Economy and

Environment

Support for

Individuals

and Families

Administration

and Justice

Consolidated

total

REVENUE

Income and property taxes 950 1 786 46 0 37 083 39 865

Consumption taxes 20 70 2 382 30 14 633 17 135

Duties and permits 2 51 1 847 13 285 2 198

Miscellaneous revenue 3 441 1 702 1 315 199 2 275 8 932


enterprises 0 0 0 0 5 430 5 430

Generations Fund revenue 0 0 0 0 1 121 1 121

Total own-source revenue 4 413 3 609 5 590 242 60 827 74 681

Federal government transfers 625 637 1 979 32 15 277 18 550

Total revenue 5 038 4 246 7 569 274 76 104 93 231

2014

Health and

Social

Services

Education

and Culture

Economy and

Environment

Support for

Individuals

and Families

Administration

and Justice

Consolidated

total

REVENUE

Income and property taxes 1 002 1 577 45 0 36 448 39 072

Consumption taxes 20 62 2 219 30 13 748 16 079

Duties and permits 2 40 1 756 13 273 2 084

Miscellaneous revenue 3 534 1 666 1 259 166 2 269 8 894


enterprises 0 0 0 0 3 232 3 232

Generations Fund revenue 0 0 0 0 961 961

Total own-source revenue 4 558 3 345 5 279 209 56 931 70 322

Federal government transfers 214 638 2 144 29 14 492 17 517

Total revenue 4 772 3 983 7 423 238 71 423 87 839

2013


188

APPENDIX 9



Consolidated statement of expenditure by government mission (in millions of dollars)

Health and

Social

Services

Education

and Culture

Economy and

Environment

Support for

Individuals

and Families

Administration

and Justice

Debt

service

Consolidated

total

EXPENDITURE BY SUPERCATEGORY

Transfer 4 534 4 575 7 039 8 730 1 160 26 038

Remuneration 22 660 12 308 1 342 494 3 491 40 295

Operating 8 378 3 695 3 295 313 1 479 17 160

Doubtful accounts and other allowances 30 42 183 6 582 843

Total expenditure before

debt service 35 602 20 620 11 859 9 543 6 712 ─ 84 336

Debt service 10 598 10 598

Total expenditure 35 602 20 620 11 859 9 543 6 712 10 598 94 934

2014

Health and

Social

Services

Education

and Culture

Economy and

Environment

Support for

Individuals

and Families

Administration

and Justice

Debt

service

Consolidated

total

EXPENDITURE BY SUPERCATEGORY

Transfer 4 412 4 190 7 073 8 533 1 152 0 25 360

Remuneration 21 295 11 666 1 296 506 3 085 0 37 848

Operating 8 280 3 629 2 874 288 1 395 0 16 466

Doubtful accounts and other allowances 30 55 46 6 704 0 841

Total expenditure before

debt service 34 017 19 540 11 289 9 333 6 336 ─ 80 515

Debt service 0 0 0 0 9 839 9 839

Total expenditure 34 017 19 540 11 289 9 333 6 336 9 839 90 354

2013


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189

APPENDIX 10

Fiduciary transactions conducted by the Government


Summary of fiduciary transactions conducted by government departments and bodies (in millions of dollars)

Assets Liabilities

Net assets

(liabilities)


Fonds des pensions alimentaires 227 227 ─

Unclaimed property(1) 139 82 57


Fonds d'indemnisation des services financiers 33 16 17

Caisse de dépôt et placement du Québec(1) 245 001 45 554 199 447

(2),(3)

Comité Entraide - public and parapublic sector(1) 9 0 9

Commission administrative des régimes de retraite

et d'assurances(1) 115

(2)115 ─

Government pension plans - share paid by

participants(1)

:

RREGOP 50 253(2)

49 534 719

PPMP 8 742(2)

10 357 (1 615)

PPPOCS 511(2),(4)

492 19

SPMSQ 232(2)

204 28

Other pension plans administered by the Commission(1) 270

(2)270 ─

Commission de la construction du Québec

General Fund(1) 242 310 (68)

Supplemental Pension Plan(1)

:

general account 3 919(2)

3 718 201

complementary account 6 125(2)

6 125 ─

pensioners' account 6 011(2)

6 298 (287)

Other funds(1) 1 858 1 112 746


Workforce Skills Development and Recognition

Fund 77 15 62

Conseil de gestion de l'assurance parentale(1) 12 12 ─

Parental Insurance Fund(1) 157

(2)605 (448)

2014


190

APPENDIX 10

Fiduciary transactions conducted by the Government (cont’d)


Summary of fiduciary transactions conducted by government departments and bodies (cont’d) (in millions of dollars)

Assets Liabilities

Net assets

(liabilities)

Curateur public

Accounts under administration(1) 419 52 367


Fonds d'assurance-récolte 236(2)

3 233

Fonds d'assurance-stabilisation des revenus agricoles 23 279 (256)

Ministère de la Sécurité publique

Fonds central de soutien à la réinsertion sociale(1) 1 0 1

Ministère des Finances et de l'Économie

Trust fund 174 174 ─


Cautionnements individuels des agents de voyages 5(2)

4 1

Fonds d'indemnisation des clients des agents de voyages 111(2)

1 110


Fonds d'assurance-garantie 8(2)

0 8

Régie des rentes du Québec

Quebec Pension Plan Fund(1) 46 843

(2)919 45 924

Fonds de surveillance des régimes complémentaires de retraite(1) 16 1 15


Fonds de garantie 10 0 10

Société de l'assurance automobile du Québec

Fonds d'assurance automobile du Québec(1) 9 028

(2)8 370 658


Compensation regime for municipal bodies 128 128 ─

2014

(1) On the basis of financial statements as at December 31, 2013.

(2) The funds of certain trusts are entrusted in whole or in part to the Caisse de dépôt et placement du Québec. The net assets of the Caisse, shown at fair value, include $131 019 M in funds entrusted to it by these trusts.

(3) The net assets of the Caisse de dépôt et placement du Québec include assets taken into account in the Government’s consolidated financial statements, particularly those of the Retirement Plans Sinking Fund and the Generations Fund. The fair value of these assets as at March 31, 2014 was $58 726 M.

(4) The assets of this plan include an amount receivable from the Government of $365 M as at December 31, 2013 in respect of participants’ contributions entrusted to the general fund of the Consolidated Revenue Fund. The amount bears interest. The Government has presented this debt in its accrued benefit obligations toward the plan.

PUBLICACCOUNTS


Fiscal year endedMarch 31, 2014

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This volume presents the consolidated financial statements of the Gouvernement du Québec, as well as a financial analysis that facilitates understanding of the transactions carried out in fiscal 2013-2014.

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THE 2013-2014 PUBLIC ACCOUNTS PRESENT THE FINANCIAL POSITION OF THE GOUVERNEMENT DU QUÉBEC AND ITS OPERATIONS.

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